Even though inflation is causing many businesses to cut back and/or raise prices, there’s good news for the labor market. According to the Federal Reserve of St. Louis, summer layoffs have been hovering at a rate of 0.9% of total unemployment, which is lower than most months of 2019, before we even thought of a pandemic. Economists believe a phenomenon known as labor hoarding is responsible.
What is labor hoarding?
At its roots, hoarding is a survival instinct for times of hardship. During the Great Depression, people saved everything, “just in case.”
Labor hoarding is the opposite of layoffs.
When the economy gets tough, some corporations lay off or even fire extraneous employees to save money. Although there is immediate gratification as seen in the quarterly profits, once reality hits, hiring back employees takes even more money.
Instead of laying people off to save capital, employees are “hoarding” employees to avoid the high cost of recruitment and training when the economy does rebound.
Employees are the lifeblood of businesses
Many people have said that cultivating and maintaining the loyalty of the right employees is one of the most important assets of a business. Hoarding often gets a negative connotation, but in the context of jobs, it’s good news for both employees and employers.
Considering the labor shortage from the Great Resignation earlier this year, employers should be thinking about how to hang on to the good employees they already have. Cutting jobs isn’t always the answer.
Labor hoarding is thought to stabilize the job market over the long haul. It has a ripple effect that impacts the community. Employees continue to pay their bills and shop, creating taxes and relying less on welfare programs. It’s good for morale. And businesses don’t have to spend thousands of dollars to find employees once the economy rebounds.