Labor hoarding is a corporate practice where businesses keep more workers on their payroll than they strictly need. Employers will hold on to their talent tightly if the future of the business looks uncertain, there are concerns about competition or a desire to avoid layoffs.
It can impact the job market, as labor hoarding keeps unemployment rates low as businesses hold off on letting people go. The downside for the economy is that this practice can cause wage inflation, as companies start fighting for a smaller pool of suitable and appropriate applicants. This can lead to businesses having too many or too few workers, which can affect their productivity and profitability.
The Scarring Effect Of Trying To Hire During The Post-Pandemic Talent Shortage
While labor hoarding can provide short-term benefits, it may also have long-term consequences if not managed effectively. Finding good talent is one of the biggest challenges companies face. If they lay off some of their people, they could find themselves in a very onerous position once they are ready to hire again.
The post-pandemic talent shortage in the United States has impacted corporate leadership. Employers have had to endure the Great Resignation, quiet quitting and other challenges in the labor market.
If companies foresee a shallow recession with a short duration, they will hunker down, hold on to their people and wait to see how things play out. It’s reasonable for employers to ride out the uncertainty with higher payrolls to avoid the long-term costs of hiring and training new people when the economy rebounds.
On a macro-economic level, when companies retain their employees, it helps to sustain consumer spending. Employees with job security are more likely to continue spending, stimulating GDP growth. By retaining employees, companies are better positioned to quickly ramp up production and meet increased demand when the economy recovers
Problems For Job Seekers And Employees
Many sectors have regained their job losses and returned to or exceeded their pre-pandemic employment levels, per the Bureau of Labor Statistics data. As many businesses have right-sized, recruiting and hiring have been dialed back, and so have the almost daily layoff announcements throughout late 2022 up until fairly recently.
Unemployment could last longer for job seekers, as companies are holding onto their people. If you lose your job, you won’t see the same speed at which people found jobs earlier in the pandemic recovery.
On the other side of the equation, labor hoarding keeps stability in the job market by reducing layoffs and providing workers with a much-needed sense of security.
However, hoarding talent could backfire on employees. Since the company is holding onto workers just for the sake of it, it’s likely that they will not receive raises. Promotions will be ultra-competitive, as there is little attrition and no firings.
Employees may not have enough work to do and will feel disengaged. After a while, management may grow weary of the extra costs associated with holding onto people who don’t add very much value to the firm.
Source: Forbes
