Blog post by Jason Lee, CEO of DailyPay, Inc.
The labor market is the tightest it’s ever been in 16 years. But if you’re waiting for the government to help, you’ll likely be waiting for a while.
Unemployment is down - way down. It’s gone from 10% to 4.7%. The economists call this type of labor market “full employment.” This makes it hard for companies to recruit, especially skilled workers who are in high demand.
Here’s the other problem: wage growth is miserable. It’s hovering at 2.5%. There has never been a post-recession recovery that has not been accompanied by wage growth. The last time unemployment was at these levels was in the late 90’s and mid-2000’s. Wage growth during those periods? 4%.
So why aren’t the basic laws of supply and demand taking over? I mean, if a company needs to hire workers, why not just pay more? Shouldn't this help with employer hiring problems? This entire question can be summarized in this graph:
Inflation is low, which means your customers aren't paying more for your products. Without increasing prices or getting more out of your current workers, it is unlikely that a company can pay employees more without meaningfully sacrificing profit margins.
Yesterday, the Federal Reserve continued its plan on slowly raising interest rates, this event moving the federal funds rate from 1 to 1.25%. The Fed seems convinced that they can manage inflation back to “normalized” levels, which could spur wage growth to the typical 4% we’re used to seeing.
But I wouldn’t hold my breath. Even with the best of intentions, trying to reignite inflation while not impairing growth - under the scrutiny of a new administration - is like trying to land a plane on the aircraft carrier in the middle of the ocean. Not unprecedented, but not typical either.
Without the ability to increase wages, companies will have to get creative about how to meet their hiring needs. One of those ways is offering unique benefits, like DailyPay. DailyPay has been proven to increase the number of qualified applicants by 1.9x and reduce the time to fill an open position by 52%. Additionally, companies that use DailyPay experience 41% reduction in turnover.
And now for the part my sales team makes me add: We’d love to talk to you about how DailyPay can improve your chances of securing talent in a tight and competitive labor market. Try our cost savings calculator to see how much your company can save in payroll and operating costs by reducing employee turnover and saving time in recruiting after introducing DailyPay to your employees.