The first installment in our Hourly Employee Series
The World Economic Forum's 2023 Future of Jobs Study has shown that employers expect a significant shift in the labor market, with a projected turnover of 23% of jobs and a net 14 million decrease in jobs over the next five years. On the positive side, these figures are lower than previous forecasts, indicating that the anticipated automation and displacement of physical and manual work by machines may not be as extensive as initially predicted. Despite this, the future remains uncertain for new entrants into the workforce as well as for workers changing jobs, as technology like AI continues to integrate into and change our daily lives.
For context, let’s look at the below chart to understand the hourly workforce. Overall, the hourly employee at large represents a substantial percentage of the total employee population. Almost three quarters of the employee population are 25 years of age or older and one quarter is between 25 and 34 years of age.
As much as it is a significant concern for employers, the size of the hourly population can be a significant opportunity. Making one impactful change in the employee experience, such as delivering competitive compensation or upskilling the hourly worker, has ripple effects spreading wide and deep. Employers not taking action results in what is commonly referred to as, ‟We are okay with the way things are.” Fortunately, it has been Mercer’s experience that employers do not behave this way. Their objective is to create meaningful work where the hourly employee is rewarded for their contribution and has a career path linked to the company’s growth.
The impact
For the better part of the last three years, manufacturing companies have reported labor shortages. Much of the story is driven by people count — there are not enough people in the workforce because they left to care for family members post pandemic, returned to school, or found other means to achieve their financial needs. In Mercer’s experience, however, employers have indicated that the reason for labor shortages is not as simple as a shortfall in the number of people available to do work; rather, there is a shortage in the number of people possessing the necessary, future-ready skills. The manufacturing sector has been grappling with a shortage of employees with specialized skills in areas such as data analytics, robotics, artificial intelligence, and advanced manufacturing integration techniques. Based on the 59 participants from manufacturing in the Mercer 2023 State of Talent Acquisition Study, the data indicates that the talent gap has resulted in 64% of them struggling to find and attract top talent that meets their business requirements.i
Other sectors that employ large numbers of hourly workers, such as healthcare and retail, are also feeling the impact of the skills gap. By 2030, a recent 2022 Marsh McLennan report estimates that the healthcare sector will have a shortage of 9.7 million lower wage and hourly healthcare workers. Citing this dynamic, the healthcare sector is also grappling with shortages of staff and difficulties in keeping lower paid workers, who are often drawn to more attractive opportunities in other industries. Executives cited employee training and upskilling/reskilling as the number one investment area that will lead to the biggest boost to productivity in 2024.iii
Aside from manufacturing and healthcare, the trend continues across industries. The skill requirements for employees are evolving due to digital transformation, robotics, AI, machine learning, computer systems, and automation. Traditional hourly roles are undergoing significant changes, and many current employees lack the necessary skills to meet these evolving demands. The rapid pace of technological advancements necessitates constant skill development for employees with prior experience.
Many employers have expressed disappointment with the skills brought to the workforce by new graduates from both high schools and universities. As a result, manufacturing employers often find themselves investing in on-the-job training and apprenticeships to bridge the skills gap and ensure that young employees can work independently.
Addressing the skills gap
To address the challenges posed by skills shortages and changing skill requirements, leading organizations are considering upskilling or reskilling their existing employees or hiring new talent with the necessary skills. Of course, skill readiness when joining the workforce or when changing jobs provides individuals the opportunity to contribute at a greater level and subsequently more quickly make an impact on the company.
Mercer 2023 US State of Talent Acquisition Survey Research, 66% of organizations report gaps between the skills they need and the skills possessed by job seekers]
Skill development must be an integral part of the onboarding process for new employees because it sets the stage for employee success in the organization today and tomorrow. It is important that HR re-evaluate how, therefore, it assesses the hourly worker’s skill readiness to identify gaps to be addressed.
So, what are manufacturing organizations doing to address these challenges? They’re doubling down on talent acquisition and on reskilling/upskilling development. During the talent acquisition stage of the employment journey, these organizations are identifying skills that are needed today and in the future. While it is early days, a portion of these leading organizations are addressing the skill gaps by offering various avenues for skills development, such as on-the-job training, apprenticeships, and continuous learning opportunitiesiv.
There are clear actions for employers to address the skills readiness of the hourly worker:
- Design the work beyond the job. Identify the skills required to perform in the role, whether through the Mercer Skills Library or another skill database. Work is a set of skills and connecting talent’s skills is the link to getting work done.
- Communicate the value proposition of being skills ready. Having a skills-ready workforce is an opportunity to attract new talent and retain current talent by reskilling and upskill the hourly employee who works with technology.
- Build the hourly worker’s career path. Align the worker’s career path with their skills development such that acquiring more applicable skills or becoming more proficient in existing skills creates opportunities to advance and earn higher wages.
The robots are not coming. They are here, working on the manufacturer’s production floor! To stay ahead, employers need a skills-ready hourly workforce that is prepared to embrace the work.
Mercer
- 43% of organizations are investing in campus hiring and working closely with universities or technical colleges to retrain and reskill young talent
- 14% of organizations have implemented robust mentorship and tutoring programs
- 79% provide specific training, learning, or upskilling initiatives
About the Authors
Andre Rooks, Partner
Andre Rooks is a Partner at Mercer, where he is responsible for developing strategies that improve the outcomes from rewards programs. Prior to his current role, Andre was head of the Career Business for the Upper Midwest.
David Kopsch, GRP, Senior Principal
David Kopsch is a Senior Principal Consultant in Mercer’s Career Business located in Atlanta, Georgia. David assists clients in retail, manufacturing, and financial services on a variety of topics, including career framework, skills and jobs design, and total rewards strategy for developing a compelling employee experience. His experience includes business restructuring and transformation for global organizations, benefits valuation assessment, and organization design.
Abby Labow, Senior Analyst
Abby Labow is a Senior Analyst in Mercer’s Rewards Practice in Chicago. Her current work includes assisting clients in developing incentive plans, total rewards strategies, job evaluation and leveling, and compensation philosophy design.