The fallout from full employment: Good, bad or something in between?

After a period of relative stability, it’s looking more and more likely that 2022 is shaping up as the year of corrections for the Australian economy. 

So, this month, I thought it would be a worthwhile exercise to look into what all of this means for the area I’m most interested in (and hopefully you too): the job market!

Soaring inflation, consecutive interest rate rises, and historically low employment rates. All of these drivers have their own story to tell about the health of the economy, and in many ways they’re linked in one way or another.

But one of the more interesting aspects of the most recent set of economic data is the fact that Australia has effectively reached full employment.

Currently there are 480,000 job vacancies, and 494,000 unemployed people looking for work. This equates to almost one unemployed job seeker per vacant job.

What does it mean for wages?

Before COVID reached our shores and the pandemic-induced recession took effect, Australia was wading through a sluggish economy with inflation, unemployment, and wage targets not being met. A source of great frustration to many, Australian workers hadn’t seen a decent pay rise in years.

According to the Grattan Institute, prior to the pandemic, this higher unemployment rate could be attributed to at least one-third of the slowdown in wage growth since 2013. Today, the downward pressure on wages has been offset by one of the strongest labour markets in half a century. 

This is great news if you’re a skilled worker in the digital space and you’re angling for a pay rise. It’s never been a better time to have the chat at your next performance or contract review.

Interestingly though, despite the tight labour markets, on the whole, real wages haven’t enjoyed increases across the board as you might expect from the current set up. The labour market is still playing catch up, it seems.

But anecdotally, I’m seeing a clear pattern of wage rises come into effect, and on the whole, it’s looking healthier than it has been for years for workers’ remuneration. 

What does it mean for supply?

From an employer’s perspective, there’s much to consider. 

Some of my clients know only too well how tricky it’s been to secure workers of late. Because supply gaps are still being plugged post-lockdown years, skilled candidates are being hunted down and offered great pay and perks to secure their services.

The accelerated shift to digital has meant that developers, architects and consultants in the Salesforce space for example, are continuing to command multiple offers to jump ship or incentives to stay put.

And with tight labour markets continuing to be a reality in the short to medium term, full employment should see this supply scenario continue, particularly in highly skilled industries.

This means that many employers are having to look inward to overhaul their retention strategies, while at the same time exploring new frontiers to find potential candidates in the first place. 

In short, it’s not the time to get caught flat-footed if your operation needs skilled people to keep things going.

Thinking outside the box

As a result of all these broader economic inputs, employers are increasingly having to think outside the box when it comes to recruitment.

In industries that rely heavily on digital, it’s as if the tables have turned with employers being the candidate seekers. HR departments are getting creative in finding who they need through proactive recruitment, cross training, and transferring skills internally.

Such is the demand for the right set of skills, I’m seeing an increase in recruitment drives happening outside traditional channels like universities in an effort to secure talent before it’s snapped up by the competition. 

Big consulting firms are moving towards reskilling senior employees to fill gaps, with transferring of skills and retrofitting rising in popularity. 

An interesting anecdote I heard a couple of years back still resonates and serves to illustrate the lengths some organisations are willing to go to secure talent. It involved Telstra who were employing people who had trained on another CRM platform, but they then reskilled them on Salesforce to suit their own internal processes. I’m sure this kind of lateral recruitment thinking is even more widespread today.

So while full employment sounds great, there are plenty of caveats and asterisks attached to it.

As is the case with most successful employers and professionals, those who adapt and pivot are the ones that will be best placed to weather the bigger market forces at play.

~ Garth Kharitou