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Breaking Up: When Growth and Inflation Break Up, This Means a Harder Hiring Environment

From Jason Lee, Founder and CEO of DailyPay: the economy is growing, and so you need more workers.  However, inflation isn’t keeping up, which means you can’t afford to pay them more. What can you do?


It’s fall.  

And so in honor of back-to-school, I thought I’d review a Day 1, Econ 101 principle:

  • Supply and demand determine prices
  • Higher growth means more demand for products
  • More demand for products means hiring more labor to make those products
  • A greater need for labor means higher pay to attract those workers
  • Higher pay means people can afford to buy more products
  • More product demand means hiring labor to make those products
  • A greater need for labor means higher pay to attract those workers
  • Higher pay means people can afford to buy more products
  • More product demand means hiring labor to make those products

 

A greater need for labor means . . . .

Last week, we learned that the US grew at an annualized 3% in the second quarter.  That’s strong.  The economy is growing which means we can expect inflation to increase, which means higher priced products, and higher wages.  But last week we also learned that inflation grew only 1.7% over the same time period.

I would argue that the fundamental relationship between growth and inflation is now breaking up.  At the risk of pointing to a doomsday scenario, one cannot help but think of Japan who just reported its strongest growth numbers at 4%, but has been mired in a 0 inflation environment for decades.  While perhaps we will see some degree of mean reversion in the United States, it is not unreasonable to at least consider the fact that growth and inflation may no longer be inextricably tied as they once were.

Today’s economy is more global, less dependent on organized labor, and has the unique development of major players working to keep prices down, further contributing to the deflationary setting.  

This backdrop presents an unprecedented challenge for managing your workforce:  the economy is growing, and so you need more workers.  However, inflation isn’t keeping up, which means you can’t afford to pay them more.  This means that despite your best efforts to create an amazing work environment, your employees have an easy time quitting over minor opportunities to increase their pay or shifts.

 

How can you address this?

If you are unable to pay your employees higher wages, then you must get creative with the benefits that you offer to attract prospective employees and retain your current workforce. My company, DailyPay, has created a unique benefit that can set you apart from your competitors. With no changes to your existing payroll platform and at zero cost to your company, you can offer daily wage payments to your hourly employees with our propietary software solution. 

Don't believe me? Check out this page that explains how our solution works. See how companies in your industry have utilized DailyPay as a retention strategy and a recruiting tool to expand the applicant pool. 

 

—Jason 

 

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Written by Jason Lee

Jason Lee is CEO and co-founder of DailyPay, a venture backed financial technology company that enables employees to access their wages before payday. DailyPay partners with large enterprises to offer its technology solution to their workforces, which results in a meaningful reduction in turnover and related cost savings. Every Saturday morning, Jason enjoys spending his time at the Father’s Soup Kitchen, helping serve hot breakfast to New York’s homeless population.


applicant pool, inflation, reduce turnover

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DailyPay enables your employees to access their pay before payday, empowering them to meet their financial goals. Employees that find financial security at your company stay longer, reducing your turnover and improving bottom line profits.

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