How The Cost Of Living Crisis Is Affecting Hiring

How The Cost Of Living Crisis Is Affecting Hiring

The cost of living crisis has been a major concern globally, with budgets straining over rising prices for housing, food, transportation, and other essentials. This economic pressure extends beyond individuals and families – it significantly impacts the labour market and hiring practices across the country. Here are some of the impacts of the rising cost of living on recruitment:

Emphasis On Job Stability

In uncertain economic times, job stability becomes a priority for many workers. Companies that can offer secure employment and a path for career progression are more likely to attract and retain employees. This trend is leading to a shift in how companies present themselves to potential hires, with a stronger focus on long-term career opportunities and financial stability. Individuals already in a stable job are less likely to risk a leap to an unknown company, restricting the talent pool of available candidates. There is also a growing trend of people taking on a second job to make ends meet. A survey of 1,096 respondents revealed that 32% of Australians aged 18 and over, equating to approximately 6.7 million people, feel financially compelled to seek an additional job in 2024. The situation is more severe for women, with 41% indicating the necessity to work multiple jobs, compared to 24% of men.

Increased Salary Expectations

As the prices of basic necessities rise, employees are seeking higher salaries to maintain their standard of living. This shift is particularly evident in cities where the cost of living is highest. Employers are finding it challenging to attract and retain talent without offering competitive salaries that entice them. ‘One in two employees are encouraged by the economy to seek a pay increase, with that figure higher among Gen Z (64%) and Millennials (55%) versus Gen X (37%) and Baby Boomers (23%). (Elmo Software)

Shift Towards Remote Work

The cost of living crisis is accelerating the shift towards remote work. Many employees are looking to reduce transport costs and other expenses related to working in the city. This trend benefits employers by broadening the talent pool to include candidates from lower-cost regions. However, it also presents challenges in terms of building company culture and ensuring effective communication across remote and hybrid teams.

Increased Focus On Benefits and Perks

To counteract the financial pressures faced by employees, many companies are enhancing their benefits and perks packages. Offering flexible working hours, comprehensive health insurance, and wellness programs are becoming more common as companies strive to provide additional value to their employees. These benefits are not only attractive to potential hires but also help in retaining existing staff who might otherwise seek higher-paying opportunities elsewhere. A person’s socioeconomic situation significantly affects their mental health, and with rising prices and stagnant salaries, many are feeling financial and emotional strain. Encouragingly, a global benefits benchmarking survey shows a 14% increase in employers offering mental health benefits, such as counseling and meditation app subscriptions, to support their employees’ wellbeing.

Impact On Small Businesses

Small and medium-sized enterprises (SMEs) are particularly vulnerable to the hiring impacts of the cost of living crisis. Unlike larger corporations, SMEs often lack the financial flexibility to offer significantly higher wages or extensive benefits packages. This disadvantage makes it harder for them to compete for top talent. As a result, many SMEs are experiencing increased turnover rates and difficulty in filling critical positions. They may need to look at other benefits such as flexible and remote working and a greater focus on culture to attract top talent.

Talent Shortages In Key Industries

Certain industries are feeling the pinch more than others. Industries like healthcare, education, and technology are experiencing significant talent shortages. The increased cost of living makes it difficult to attract professionals to high-demand, high-cost areas, increasing the existing skills gap. Some companies are investing in training programs to develop talent internally, building out career pathways and internal mobility programs. 

Keen to talk about your recruitment needs? Speak to the team at Flexi Personnel.