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Will companies ever have as many employees as they did before the downturn?
"One of the great surprises of the economic downturn that began 27 months ago is this: Businesses are producing only 3 percent less goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cuts in the workweek. That means awesome gains in productivity, which in the long run is the key to a higher standard of living but which in the short run contributes to sky-high unemployment," the Washington Post reported recently.Meanwhile, the Labor Department says that while job growth in the U.S. in March was the strongest in three years, long-term unemployment got worse and average hourly wages fell for the first time since 2006. So will your company ever have as many employees as it did before "The Great Recession?" Why or why not?
Best Answer
Michael, I am actually drafting a Brief on this as we speak. I wonder if we are entering a period of tremendous value creation with little to no corresponding job creation. Or in other words and to use one example, could Google let go of 95% of its employees and retain 95% of its revenues? More importantly, what does that mean for society?
Even in the short run, the cited "productivity gain" applies only in (simplistic) economic theory. The realities of postposing rehiring are: lower quality of product outputs, postponed improvements in servicing customers, postponed maintenance of noncritical systems, etc.
Probably not, the answer is in your question.
If you can shed 10% of hours and only drop 3% in productivity, why would you need to hire them all back when business gets back to normal?
With no strong labour law to protect workers in the US from excessive employer demands, and a shortage of jobs in the first place, this is likely to worsen if anything.
I'd like to believe this will result in "improved living standards" but it won't, this is a "harder not smarter" moment, and without pushing balance through the workforce (by creating more part-time or job share opportunities for example) then it means you have a smaller working group, working longer hours with less time to spend their wealth than ever before, and a larger group of discontented unemployed.
As much as I'm in favour of a free-market economy, sometimes it needs a little nudge to head off in the right direction. I'm not sure it's going to get one in the US.
From my perspective... I left my job during the downturn, and have since set up two companies both of which now have more employees than when I started, so job creation still exists...
Good point. most companies are operating below their pre-recession numbers. Yet there are some sectors, such as health care and education, that have actually continued to add jobs during the downturn. There other sectors, such as manufacturing, that were losing jobs even in 2006 and 2007. That sector is down about 30% since the turn of the milennium.
While there have been signs of an upturn, there seem to be some mitigating factors. Markets, such as retail and financial services, seem to be undergoing fundamental reshapings. It seems unlikely that they will continue to operate as they have in the past, but it is also not clear (at least to me) how they will be structured in the future or when (or if), they will need more employees.
In sum, I think select companies will continue to hire, some will start later this year (it does seem like we have bottomed out), and others may not see a change for another year or two. This downturn and recovery seems to be a bit bumpier and (therefore harder to predict) than others in the past.
This is an important question for employers, HR professionals, employed persons and the unemployed/marginally or under employed, or those who are unemployed.
The employment market will return to previous levels, but it will take a very long time. Large employers will not be key to employment growth. Instead it will be small companies and startups - often self or minimally funded and bootstrapping their way to profitability.
Large organizations have disintermediated many of their non-core functions and this will continue, as it has for over 30 years.
Ours is now a global market and the percentage of business on a global basis will diminish in proportion to the growth and expansion of ex-US firm's growth in the US and elsewhere in the world. The ever downward push for lower prices and costs of manufacture and sales will continue unabated.
The key answer is "where's the jobs?" They are likely to be with small founder led companies where the risk/reward is extraodinary. Energy and creativeness, combined with moxie will drive the day.
The return to previous year's high employment rates will depend on small businesses obtaining credit to finance their ideas, people willing to adapt to a changed environment, and a recognition that the age of large, dominating organizations, while not over, will be curtailed and slow to re-emerge.
Certainly, but there will be a long lag. For now businesses will continue to curtail hiring and enjoy that productivity as they use up inventory and put off expansion and wait to see what the outcome is from massive debt spending and new regulations coming from the Federal government. But eventually they will have to invest in inventory replacement, new locations, new products, and hiring people.
Many economists, and certainly the stock market, think we are at that phase now. It might not be until after the fall elections, or as 2012 approaches. But it will happen.
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One of the great lines I heard back in the 1980's that has remained with me ever since is "the most difficult time to manage a business is in the good times".
Now that the world is that bit tighter with it's cash, it is easy to make the difficult decisions. In truth, the world needed this shake-up, though probably not as severe as this one, to come to its senses. Organisations were over staffed in recent years. A new generation of managers who knew only growth turned into Microsoft Programmers.
They added frills no body wanted and allowed their workforces to "bloat" rather than writing tight code or running a good ship. It was easier.
This is a time for true leadership and leadership development. Organisations need to look to the future and decide what they want to be in 10 years or more. Forget about the finance houses and the quarterly returns.
Short term focus on short term gains creates expedient managers. It creates gaps in the organisation for the sharks to exploit and it eradicates employee loyalty. Or should I say, it eradicates well meaning employee loyalty and replaces it by the loyalty of greed and self gratification.
Businesses need to be rewarded for long term planning and sustainable growth. Otherwise, we will never manage to control the boom-bust cycle.
The market pays for output, not activity. If managers and leaders keep that in mind workforce bloat won't happen.