Impact of Full Employment Economy on Workforce, Organization & Economy

A full-Time employment economy is a state defined as one where there is zero unemployment, and all the resources are employed with 100% efficiency. Economists have long since established that this is a theoretical state and cannot be achieved. Thus, high employment with maximum possible efficiency is considered as the desired state.

However, in the talent market, it becomes imprudent to take into consideration, that high employability is a culmination of many factors- absence of skill gap, equally proficient and available talent, lack of competition in compensation awarded etc. We know this, after the great war of talent post pandemic, is a myth.

What is instead created is a highly competitive, employee driven market where the job creators vie for attention to attract the top talent- with exorbitant compensations, bells & whistles on profiles, and sometimes even raiding a direct competitors talent pool.

Source: The Mint (2021)

The Economy under such talent strain, performs better in the shorter run, but left unchecked the repercussions can take root and cause problems decades later. Case in point, the US Economy, “War for Talent” though coined in 1997, by Steven Hankin- remains a very prudent reality for economies all over the globe. The US did try to mitigate its impending war in the late 2000s by hiring better fits with aligned value systems, making systemic changes to fit Millennials, and leaders being vocal about their expectations and awarding employees that meet these. Yet, come 2020, and the war was back to square one.

Work from anywhere policies, demography shifts from millennials to Gen Zs, a global pandemic- all made it difficult for US companies to keep operating as they did, and still survive the tech talent crunch. This led to the realization that major political reforms are to be put in place to combat the talent war.

Thus, the problem that emerges is multifold. A highly competitive market not just impacts the employer and employee but has the power to change the nation’s economy and policies.

While there are apparent negative impacts, there will be positives outcomes from the war too.

Impact on Economy from a Talent War

The Economic conditions are directly dependent on the activities of employers and thus the innovation and Growth is inevitable for the economy post a talent war. Companies competing for talent often invest in research, development, and innovation to stay ahead. This can lead to the creation of new products, services, and industries, fostering economic growth and skill development.

A talent crunch also opens the doors to talent, market, and investors from abroad which encourages global competitiveness. A highly skilled workforce can enhance a country's global competitiveness, attracting foreign investment and fostering international trade relations.

The flip of it however, brings with it its own set of challenges. The competition for talent can lead to higher salaries for skilled workers, widening the gap between the wages of skilled and unskilled workers. This can exacerbate income inequality within society. This also propagates, "brain drain", where skilled workers migrate to areas with better job opportunities and higher salaries. This can lead to a loss of talent and skills in certain regions, which can hinder economic development.

Additionally, in sectors experiencing a talent shortage, wages and competition for workers can skyrocket, leading to inflationary pressures. Conversely, in sectors with an oversupply of talent, wages may stagnate, leading to dissatisfaction among workers.

Impact on Employers and Job creators from a Talent War

While innovation and productivity remain the driving motivation and ultimate outcome of talent wars, a happy by-product is improved employer brand and position as an employer in the talent market. However, it goes without saying that the brand is itself a product of people and culture practices, quality of work, total rewards program, learning and growth opportunities etc. It also helps when employers are not just able to hire new talent, but also retain their existing workforce.

Competition for talent can drive companies to improve their working conditions, offer better benefits, and provide opportunities for career advancement, leading to higher employee engagement and productivity. The need to attract and retain skilled workers can drive employers to foster a culture of innovation, resulting in the development of new products, services, and processes.

On the other hand, Talent wars can drive up wages and recruitment costs, putting pressure on employers' budgets and reducing profit margins and often upending total rewards structures internally. High competition for talent may result in increased employee turnover as workers are lured away by better offers from rival companies. This often leads employers to quickly fill the vacancies where either, it is motivated by short term goals and might be band-aid hiring to patch the wound that the exit of an employee caused or often leave very few options to make a choice from when it comes to talent selection.

Impact on Employees and Job Seekers during a Talent War

In a talent war, it is the skilled and talented and most wanted employees that call the shots and so they often receive higher salaries, better benefits, and more perks as employers compete for their skills and expertise. Employers may offer opportunities for career growth and development to attract and retain talent, leading to better job prospects and higher job satisfaction for employees. Employees may have access to more training and development opportunities, allowing them to enhance their skills and advance their careers.

But, in a developing economy like India, where the pay parity remains too high across sectors, there have been evident cases of grey ethical practices that employees may employ. For example, holding multiple offers, and leveraging one against other to raise costs, or refusal to come to office and using work from home opportunities as a bargaining chip, leaving critical projects mid-way with no care of repercussions- just because they have a counteroffer. Individuals also are paying exorbitant amounts, specially in the tech world, where their experience or skills have not proportionately grown with their compensation- which leads employers to have certain expectations – which often lead to a feeling of job insecurity or burnout.

Conclusion 

In conclusion, a talent war can have far-reaching impacts on economies, employers, and employees alike. While it fosters innovation, productivity, and career advancement opportunities, it also brings challenges such as income inequality, rising costs for businesses, and job insecurity. To navigate these complexities, policymakers must strive for inclusive growth strategies that address disparities, promote skills development, and ensure that the benefits of a competitive labor market are shared equitably. Similarly, employers must prioritize talent retention, invest in workforce development, and foster a supportive workplace culture to thrive in an increasingly competitive landscape. Ultimately, by striking a balance between competition and collaboration, societies can harness the potential of a talent war to drive sustainable economic progress and prosperity for all.