In the war for talent, talent is winning. Unemployment has not been this low since 1968. Employers are paying 20% compensation premiums to hire new employees. And across nearly every industry, the number one challenge on the minds of executives is how to recruit and retain top talent.
Some experts argue we are entering a new era in which workers will enjoy the upper hand. If they are right, then now is the time to take a break, work less, or explore a career tangent because your employer will be eagerly awaiting your return. But there are long-term, systemic reasons to believe the shift may be temporary—and recent economic uncertainty is putting greater weight on that possibility—which would require a very different career strategy.
Is the bargaining power of employees a new normal or temporary? What strategy should you deploy to ensure you end up on top?
3 reasons the worker-powered market will continue
Why might we be entering a new era of employee power? There are three reasons.
- Baby boomers are retiring: Members of the baby boomer generation are now 57-75 years old. The youngest ones will soon retire, and there are not enough younger workers to fill their wake. According to David Kelly, JPMorgan chief global strategist, the number of Americans over 65 is growing more quickly than the number over 16. Goldman Sachs reported that 2.5 million people retired during the pandemic, a number that is unlikely to fully reverse.
- People are leaving the workforce: A second factor in favor of a continued labor shortage is that many people will simply never return to work post-Covid. The Society for Human Resource Management (SHRM) reports that unfortunately from February 2020 to January 2022, 1.1 million women left the labor force. Even as the pandemic subsides, many are opting not to return due to the lack and high cost of quality childcare. People close to retirement simply retired early and have no plans to return. Others can’t return due to ongoing effects of Covid-19 illness, including fatigue, brain fog, and memory loss.
- Demand outstrips supply: In early 2022, the US jobs report showed no signs the labor shortage would end soon. Hiring rates remained higher than quit rates across industries, showing that employees continue to have the flexibility to change jobs and negotiate for better treatment.
3 signs that the ‘Age of the Employee’ is only temporary
But there are reasons to believe the tables may turn back to employers:
- Market readjustment: Evelyn McMullen, research manager at Nucleus Research, a global provider of ROI-focused technology research, reported that if inflation continues at its current rate, the market response will weaken job seekers’ advantage. Increased costs of living will force them to accept any job quickly.
- The continued rise of automation: In 2020, the World Economic Forum predicted that one in five jobs will be replaced by automation. Today’s labor shortages are increasing the urgency with which employers look to replace workers with machines, accelerating the adoption of automation. Employees who quit may find their previous roles replaced by robots.
- Global competition: Forced to accept remote working policies, employers appreciate that less needs to be done at the office than they once assumed. If a compliance analyst can suddenly do her job from an apartment in Manhattan or a bungalow in Hawaii, why not hire someone from a lower-cost geography like the Philippines? Today’s US workers are increasingly competing with a global applicant pool as the world flattens further.
The influence formula
Which side will win out? Are we entering a new era or will the pendulum swing back in favor of employers? Even Federal Reserve Chair Jerome Powell can’t say. But there are steps you, as an employee or job seeker, can take to capitalize on this moment in which you are in the driver’s seat to maximize the future opportunities it may provide.
The key to prolonging this moment of influence is by locking it in today.
I’ve found that employees with track records of building influence inside their companies do so not by luck or magic, but by leveraging three factors. You can put these factors into an influence formula. This is drawn from the work of David Maister.
The formula is simple but effective. It seems obvious, but in practice is rarely used. Implementing this formula now, while you have bargaining leverage, can position you for continued influence regardless of what the future labor market holds.
Your Level of Influence = (Rapport + Perceived Expertise) / Perceived Self-Interest
- Establish rapport: The more effectively we can establish common ground with others, the more our influence increases. People tend to relate to people like them. Christian Busch, author of The Serendipity Mindset: The Art & Science of Creating Good Luck, offers advice for building rapport: When someone asks, “What do you do?” instead of responding with a job title, say something like, “I’m a technology entrepreneur who recently started reading into the philosophy of science, but what I’m really excited about is playing the piano.” You’ve given three potential hooks where you might create a connection.
- Develop perceived expertise: Just as you trust a doctor who you think knows what they are doing, people are more likely to trust you if they believe in your expertise. The advent and evolution of so many disruptive digital technologies makes becoming a true expert in them hard. But you can develop your perceived expertise by learning enough to ask the right questions to make good decisions. Tsedal Neeley, professor at Harvard Business School and co-author of the book The Digital Mindset, recommends using the 30% rule. According to her research, you only need to develop 30% fluency in a technical topic to understand the tools and use them to your advantage.
- Reduce perceived self-interest: As a quick math refresher, when the denominator of a formula decreases, the value of the formula increases. So, the lower your perceived self-interest, the greater your level of influence. You naturally trust the lawyer who has your best interest at heart rather than the one you think is after more billable hours. There are several effective methods for demonstrating you value others’ interests highly. Find and appeal to a shared goal, rather than your personal goal. Ask more questions than you provide opinions. Imagine you are someone else observing you from an external perspective. This will remove you from your internal dialogue and reduce your ego.
We are experiencing a historical moment in time in which employees hold the chips. While there are reasons to think this new bargaining power may be permanent, the pendulum of the labor market continuously swings.
Given the uncertainty ahead, seize the moment today. Lock in your bargaining power by using the “Influence Formula” to enhance your career prospects and take advantage of today’s job market opportunities.