- Remote work, the gig economy, diversity and inclusion, and other factors are dramatically changing the makeup of the labor market.
- At the same time, technological advancement is creating a gap between open roles and properly skilled workers to fill them.
- Businesses must adapt workforce planning and workforce development strategies to find and retain the right workers.
Business leaders are facing a double-dose of workforce challenges: There are too many people without jobs, and too many jobs without people to fill them.
The gap between unemployed people and open jobs is owed to many factors, among them an unprecedented reset resulting from the pandemic in how and where people work. Another factor is the lack of properly skilled workers to fill open positions. The rise of independent contractors and the so-called “gig economy” has also changed the job market, as has the focus on building more diverse workforces.
Together, these changes mean business owners must engage in more strategic workforce planning to find and retain the right workers for the evolving labor market.
Understanding the U.S. workforce
The composition of the U.S. labor market has changed dramatically over the last few decades—and it will change even more over the next few. By 2024, for instance, women are expected to account for 47.2% of the workforce, and less than 60% of the workforce will identify as “white non-Hispanic.” Foreign-born workers, a term used by the Bureau of Labor Statistics to categorize legally admitted immigrants, refugees, temporary residents (such as students and temporary workers), and undocumented immigrants, accounted for 17% of the 157 million people in the U.S. workforce in 2020, up from 10.8% in 1996.
Contingent workers, which includes freelancers, independent contractors, and other gig economy workers, also represent a growing portion of the labor force. It’s estimated that gig workers make up between 10% and 30% of the U.S. workforce. Since the pandemic, it’s likely that the number of independent contractors has continued to rise.
What is workforce planning?
Workforce planning is the process an organization undertakes to analyze its workforce and determine the steps it should take to prepare for future staffing needs. Workforce planning goes hand in hand with workforce management and workforce development. Workforce management is the framework for maximizing employee productivity. Workforce development involves providing training and development opportunities to help employees grow their skills and capabilities.
The goal of workforce planning is to help close the gap between open positions and candidates who are under or overqualified to fill those positions. When combined, workforce planning, management and development can help businesses retain their best employees, give them the tools to be successful, and identify skills gaps that are better served through hiring.
Successful workforce planning involves understanding business objectives, uncovering potential skills gaps, creating a strategic training and development plan, and determining what processes or functions can or should be outsourced.
The contingent workforce
Outsourcing is when a company subcontracts a job or function to a third party. This could allow the company to save money, time or to fill a gap in personnel. Services can be outsourced on a regular basis, such as accounting services, or as a one-time service, such as web design.
As more businesses outsource strategic functions, the contingent workforce has grown accordingly. Defining which categories make up the contingent workforce vary, but most experts agree that the contingent workforce includes freelancers, independent contractors, seasonal workers, and other “alternative” workers who perform a variety of nonstandard jobs.
Members of the contingent workforce typically do short-term work for multiple clients. The work may be project-based, hourly or part-time, and can either be an ongoing contract or a temporary position. Workers under the age of 25 are more likely to become members of the gig economy.
How to build a diverse workforce
Many organizations are recognizing that diverse workforces tend to be more innovative, more profitable, and more desirable for potential job candidates.
How does a diverse workforce influence organizational performance? There are financial outcomes, as well as other business metrics, that conclusively show how workforce diversity is tied to success. For instance, companies in the top quartile for ethnic and cultural diversity on executive teams outperformed those in the fourth quartile by 36% in profitability.
In building a diverse workforce, consider not only factors like gender, ethnicity, religion, and sexual orientation, but also diversity of thought and past experience such as military service. Veterans are often considered top job candidates for nearly any industry, and many business owners want to support this community as they transition back to civilian life by employing them. Hiring veterans can earn business incentives, bring leadership to your team, and, given their extensive training, help bridge existing skills gaps within an organization.
The benefits of second-chance hiring
One form of diversity hiring that’s also become more popular is second-chance hiring: the practice of hiring individuals with a criminal record. Second chance hiring is not only altruistic, but also taps into a massive source of talent that can benefit many businesses.
An estimated 70 million people in the U.S. have an arrest or conviction record, and over 600,000 men and women are released from jail each year. Second-chance hiring is a win-win-win for employees, businesses, and society. Second-chance employees are able to get a fresh start by earning a paycheck. They also have higher-than-average retention and productivity metrics, thus benefiting employers. Moreover, the larger community gains in terms of reduced recidivism and the development of human capital. Particularly against the backdrop of the current labor shortage, more and more leaders are joining the call to improve the employment of formerly incarcerated individuals.
To learn more about the tight labor market, growing skills gap, and steps that businesses can take to improve workforce planning, check out the U.S. Chamber of Commerce’s America Works resources.