Inflation from an HR Perspective

Written by Matt Holland, Sr. HR Business Partner

What’s driving the labor shortage?  This question is on the mind of many small to medium size business owners and even large employers. What does the labor shortage have to do with inflation?  For those that don’t remember economics, there are just simply not enough workers to meet demand especially in lower level jobs. 

To attract applicants, many employers are resorting to increasing starting wages.  This has now resulted in increasing business costs thus higher prices and contributing to inflation.

So how does the current inflation impact an HR professional?  It simply makes it harder to recruit certain positions.  As a profession, the old way of recruiting in the last two years of simply posting a job and having a sufficient applicant pool doesn’t work.  How does an organization compete for labor other than higher wages?  

Rather than adjust a compensation philosophy which sounds easier than actually doing it, organizations are going to have to start looking at intangible benefits and alternate labor pools.

For intangible benefits, this might include offering paid maternity and paternity leave.  Given the fact that the United States Congress is the best example of groupthink on planet Earth, the actuality of amending the family medical leave act is highly unlikely.  For larger employers, offering onsite daycare is another perk.  The Home Depot based in Atlanta, GA started this years ago.  When this author interviewed there, I can remember the interviewer speaking very highly of the onsite childcare, and offering this perk will simply attract the number one group who hasn’t returned to the workforce which are working women.  

Finally, for those employees that went remote and had to deal with childcare, family, and work all at the same time, offering an extended, paid sabbatical (6 plus weeks) might be worth it.  What are the benefits of these offerings a CEO might ask?  These benefits will create an employee centric culture and signal to applicants that the business or organization truly values it’s greatest asset which is PEOPLE.

What are alternate labor pools?  These pools are often overlooked because workers simply don’t have access due to education or other barriers.  Programs like Year-Up are fantastic alternate sources.  Where it makes sense, companies also need to be open to sponsorship.  Partnering with a local homeless shelter or even a company like honest jobs which helps former inmates find employment are also great alternate sources.  

What do these programs or non-profits have in common?  Some of them go to sources where HR professionals are typically very uncomfortable going for a labor pool due compliance reasons or cost; however, hiring from these sources will greatly increase diversity and benefit the community around organizations.  

The U.S. Federal Reserve has indicated it will raise interest rates in the coming months to cool inflation.  What does this mean for the labor market? In short, does this mean workers will return?  I predict that this might cool inflation, but higher starting salaries are here to say at least for the foreseeable future.  

As labor experts, HR professionals are going to have to advise business leaders to start getting creative with how they attract talent and not simply by posting a sign out front with the starting wage and hoping for applicants.