Labor hoarding is an emerging trend related to the current economic environment. Let’s explore it.
December 13, 2022
As defined by Inc., labor hoarding is when companies hang on to employees during a tough economic period because they believe they’ll save money in the long run. The idea behind it is to “ride out the uncertainty with higher payrolls — in order to avoid the long-term costs of hiring and training new people when the economy rebounds.”
However, a report by the Center for American Progress indicated U.S. companies lose an estimated $64 billion annually by replacing employees who departed because of unfairness and discrimination. This is only a handful of the many reasons employees leave their jobs, so we can reasonably infer that the cost is significantly more than $64 billion a year.
It’s disturbing to think companies want to focus on retention now because they’re worried about the cost of rehiring/training after an economic downturn, when they’ve been losing billions every year through the loss of employees who depart due to discrimination. Only when that talent loss cost gets compounded with the broader financial hit of an overall depressed market does the focus turn to retention.
This isn’t a new ask
DEI experts have been begging companies to focus on retention for years, instead of hiring more marginalized talent that companies then harm similarly to the experience of current marginalized employees. By investing in current talent, focusing on ways to mitigate discrimination, ensuring equity of pay and advancement and prioritizing a better experience for current employees, companies could overwhelmingly mitigate the cost of talent loss while also creating “employment brand evangelists” and a legendary company culture.
Retention plans, especially those focused on DEI, should begin during the interview process. Every candidate is a possible employee and should be treated as such, with dignity and respect and an eye for retaining them long-term. Just as getting a job is valuable, so too is hiring a great employee. Respecting all candidates is a step in the right direction to launching a strong retention plan.
Focusing on long-term retention will not only improve the employee experience but will also mitigate many of the financial concerns now being prioritized due to the economic environment. Dialing in employee engagement (a symptom of retention issues and a predictor of employee turnover) can be done with minimal additional cost but can reap tremendous reward in lessened talent replacement costs.
An exception to every rule
There is one place, however, where labor hoarding in its intended format could actually be good for business. The service industry is largely doing away with many of the minor and often ridiculous infractions that would lose an hourly employee their job, such as termination for repeatedly returning from break five minutes late. The current economic climate is creating a hyper-focus on labor engagement issues in the service industry that ultimately will lead to an improved work environment for both employees and managerial staff.
Despite all this, layoffs are still coming. Half of employers estimate layoffs are on the horizon, according to a recent PwC survey. It will be incumbent on employers to judiciously balance talent retention goals with economic cost cutting and layoffs, as well as on employees to clearly understand “labor hoarding” does not mean job security. If employers are looking to reduce costs while boosting employee retention, they might consider cutting back on physical real estate, as 65 percent of the workforce wants to work remotely full-time.