How to attract and keep employees in a tight labor market

As we approach 2024, the labor market is poised to remain highly competitive, making it challenging for businesses to attract and retain top talent. However, you can still fill your talent pipeline by offering the competitive salaries, benefits, and other rewards that top talent is looking for today.

We’ll explore the current state of the job market in 2023, highlight the unique challenges different industries face, and delve into strategies for attracting and maintaining employees.

How is the job market right now?

Mercer’s 2023 labor market review showed that while the labor market is still hot, it’s beginning to cool.

What does that mean for businesses?

The labor market is beginning to balance as hiring and job growth return to prepandemic levels, and unemployment isn’t significantly increasing.

Labor market trends from the past few years have fluctuated greatly. In 2019, the prepandemic hot labor market sat at 5,000,000-7,000,000 unemployed workers, and a similar number of job openings. In 2020 we saw unemployment spike. You will remember the mass layoffs that caused a giant surge of over 20,000,000 unemployed workers accompanied a drop in job openings.

In 2021, the labor market took a turn as businesses began rehiring to fill positions vacated during the mass layoffs or to replace workers who left. This caused unemployment rates to dip and the number of job openings to increase.

There are multiple causes for labor market shift including:

• Workers left the job market altogether to become full-time caregivers to compensate for rising care costs
• A mass exodus of retirees, especially among the baby boomers, leaving the workforce
• The great resignation, in which many workers quit their jobs and industries either to pursue a new career or to take time to enjoy other areas of life.

As a result, businesses couldn’t keep up and employee attrition outpaced hiring.

Looking at the job market right now, there is good news. The number of workers leaving their jobs is decreasing. Employers are finally starting to catch up with filling roles within their companies, though there remains a labor shortage (approximately 3 million) relative to job openings in the US.

Industries Most Impacted by the Tight Labor Market

Going into 2024, the US job market will look different for each industry. Some will feel the market balance while others will feel the pinch a little longer.

Sectors with large hourly populations are in the most precarious position. The industries most impacted by a tight labor market are:

• Accommodations and Food Services
• Leisure and Hospitality
• Retail Trade

The above industries are seeing the highest labor leverage ratio, which is the number of employee-initiated quits per employer layoff. This means they will feel the tight labor market more severely and should take extra care in creating a competitive compensation and benefits package to stay afloat going into 2024.

Manufacturing, arts, entertainment, and recreation fall between the extremes at about 3 quits per discharge or layoff. Construction, Information, and Business and Professional Services have the lowest labor leverage ratio, indicating a more even balance of power between employee and employer and likely a more contented workforce.

The Future of the Job Market Moving into 2024

The future of the job market is bright, according to Mercer's research on job market predictions. Layoffs aren’t impacting the labor market as they have in the past, allowing it to begin stabilizing.

However, some industries are still feeling the impact of mass layoffs and the great resignation, especially the tech industry.

Even though the market is on the path to rebalancing, it remains tight. You will notice some lingering challenges going into 2024.

To maintain your hiring equilibrium, it’s essential to care for employees and manage your employer brand.

3 Tips for Attracting and Maintaining Employees in a Tight Job Market

1. Understand your employees

Understanding your employees helps you create a healthy, supportive, and competitive workplace. Understanding their wants and needs begins with employee listening.

Regular surveys and one-on-one discussions can help you understand what your employees value most. Mercer offers a suite of services and tools to help you with employee listening.

Are they looking for more flexible work arrangements, better work-life balance, or opportunities for career advancement? By actively listening to your workforce, you can tailor your strategies to meet their needs.

2. Actively engage employees

Employee engagement goes beyond salary and benefits. It involves creating a workplace culture where employees feel valued, heard, and motivated. Engaged employees are less likely to quit while being the most productive part of your workforce.

Here are a few strategies to engage your employees:

• Encourage open communication
• Recognize achievements
• Invest in employees through a healthy work-life balance, competitive benefits, and company events
• Provide opportunities for professional development

3. Offer competitive salaries and benefits

Competitive salaries are crucial in a tight labor market, where employees can easily switch jobs and find better pay and benefits. Use Mercer’s industry benchmarks to ensure your compensation packages are competitive. Consider performance-based bonuses and other financial incentives to attract and retain top talent.

Health insurance, retirement plans, paid time off, and wellness programs can significantly impact your ability to attract and retain employees. Tailor your benefit offerings to your workforce’s needs and preferences.

Are You Prepared for the Job Market in 2024?

Organizations can thrive, even in a competitive landscape, by understanding the current state of the labor market, recognizing industry-specific job market trends, and focusing on employee attraction and retention strategies.

Mercer's workforce trends and compensation expertise can help your organization stay competitive and ensure your employees remain engaged and satisfied in their roles. Don't miss out on the opportunity to make 2024 a successful year for your business.

Are you ready for the 2024 labor market? Contact Mercer today at 866-605-1031 to access the data you need to thrive even in a tight job market.