Human Capital Intelligence - 3/13/2024
AI changes labor's importance | Tale of two labor market | SMB spending falls | Separating policy reality from political rhetoric | Housing payment benefits
Welcome to the latest edition of Human Capital Intelligence. As always, we would love to hear from you at ken@stibler.me with news ideas, feedback and anything else you find interesting.
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By Ken Stibler; Powered by Reyvisum Analytics
What’s Working
Big Read: AI’s competitive disruptions erodes labor’s importance while increasing dependence on key talent
HCI focuses on human capital and labors’ critical, but under-appriciated, role as a business input. But, change is afoot on the role labor plays in many businesses.
AI is already creating winners and losers as labor cost reductions and efficiency gains raise the bar for competition in many industries. Companies that fail to embrace employee augmentation, productivity enhancement, and labor retraining risk falling behind. Competitors who are leveraging AI can increase their output and create cost savings that can be passed on to consumers.
For instance JPMorgan’s cash management tool slashes manual tasks across the workflow by 90%. While such examples may seem remote or intimidating to some, the reality is that over 2,500 JPMorgan clients are already reaping the benefits of this technology, enabling them to deploy their resources more efficiently and effectively.
Top performing small businesses spent between .5 and 1% of yearly top-line revenue on the finance function. And tools like the JPM cash management platform are being released every day across all business functions, offering an astounding opportunity to increase profit while being more competitive on pricing.
Tech giants and industry leaders are plowing billions into AI-related technologies, recognizing the immense potential for competitive advantages through increased productivity and efficiency.
The capacity to achieve more with fewer employees creates an off dichotomy for employers: While AI erodes the overall value of labor, it simultaneously elevates the critical dependence on a core group of highly skilled, adaptable, and innovative employees. Small businesses that recognize and address this paradox through strategic upskilling, talent development, and cultural transformation will be best positioned to thrive in the AI-driven future of work, and maintain a competitive edge in an increasingly cutthroat market.
Tale of two labor markets: Strong headline figures hide falling wages, quit rates
The US labor market is flashing contradictory signals, with headline figures portraying strength while underlying indicators suggest a cooling trend. January's job report showcased robust hiring, with the addition of 275,000 new positions, marking a 0.2 percentage point uptick in job growth. However, beneath the surface, the quit rate – a key measure of employee confidence – fell to 2.1%, its lowest level since August 2020.
“We’re entering a post-industrial economic era with a persistently tighter labor market, a stronger emphasis on skills, and the rapid expansion of technology like AI.”
HR analyst Josh Bersin
This divergence has fueled hopes of an impending rate cut by the Federal Reserve, as a softening labor market could alleviate inflationary pressures. Notably, the quit rate, which tracks the percentage of workers voluntarily leaving their jobs, is being interpreted as a sign of employees "nesting" and opting for job security amidst economic uncertainties. While payroll gains remain robust, wage growth appears to be stagnating, adding to the narrative of a cooling labor market.
Reading List
Middle managers drive broad decline in employee confidence
Employee confidence in the United States has plummeted to a record low, with middle managers at the forefront of this alarming trend. According to Glassdoor's Employee Confidence Index, the confidence level among middle-managers hit an all-time low in February, dragging down the broader index to 45.1%, the lowest since data collection began in 2016.
Read more about the pressures undermining middle managers from above and below.
Small businesses’ salary increases decelerate
Despite the resilient labor market conditions, small businesses are scaling back their plans for wage increases and hiring, with only 19% of smaller firms planning to raise wages according to the National Federation of Independent Business (NFIB). This comes after 12% of workers, roughly 20 million workers, did not receive a raise in 2023.
Read more about the drivers and implications of this pullback.
Understanding policy relevance amid political rhetoric
From the State of the Union to a court in Texas, this week saw a rush of political activity around labor regulations and proposals. While it's easy for businesses to start preparing for the next headache, such headlines are often a head-fake given structural changes to how Washington works (and doesn't). As election season rolls around, business leaders should be able to to sift through the difference between material and irrelevant stories coming from political spaces.
I can tell when employees call [the firm] with complaints that HR is not well-trained on what the law is, and they’re often not well-trained on what the company’s own policies are.”
—David Gottlieb, partner at employment law firm Wigdor, on when HR pros are not legally competent
Read more about what to watch, what to worry about, and what to ignore.
Housing payment assistance offers a rare, but highly, valued benefit
25% of employees would consider switching jobs to gain access to housing payment assistance, according to a recent survey of employees across 300 companies by insurance agency JW Surety. The survey revealed an overwhelming demand for this rare benefit, with nearly one in three respondents preferring housing aid over a pay raise, and 43% favoring it instead of extra paid time off.
Read more about how younger employees home ownership struggles can be an opportunity for a truly differentiated benefit.
Stat of the Week
In Other News
Big Business Is Facing a Big Idea Drought: As globalization reverses, industrial policy revives, and AI rises, a once-creative management theory industry is running on empty. (Bloomberg)
Revolutionizing learning: The power of AI and VR in employee development. (Chief Learning Officer)
Flexible Hours Come to the Factory: Manufacturers are trying to attract and keep workers. (Wall Street Journal)
Why businesses are raising their relocation game: Employers are under pressure to offer more help to ‘trailing spouses’. (Financial Times)
The Frontline Workforce Divide is Growing. Why? (TalentCulture)
There Are 340,000 Fewer Accountants, and Companies Are Paying the Price. (Bloomberg)
1 in 3 employers say they anticipate higher turnover in 2024. (HR Dive)
When Slowing Down Supercharges Productivity. (Bloomberg)
3 ways recruiters can set themselves apart from scam offers. (HR Drive)
The Shift That Explains Lofty Markets: The Economy Got More Productive. (Wall Street Journal)
Gauging the impact of gamification on employee engagement. (Employee Benefits News)
An explosion of data coupled with advancements in tech means auditing compensation is now a year-round endeavor for HR. (HR Brew)
The Economist’s glass-ceiling index: Our annual measure of the role and influence of women in the workforce. (The Economist)
Patients Lose Access to Weight-Loss Drugs as Employers Stop Coverage: To rein in spending, employers discontinue reimbursement or place limits on who is covered. (Wall Street Journal)
These are the most common mistakes companies make that land their workers fat settlements, according to employment lawyers. (Business Insider)
Gen Z reports workplace bullying amid RTO — but are they just taking things the wrong way? (WorkLife)
Employee Experience, Future of Work, Hybrid Work: Should Workplace Trends Come With Expiration Dates? (TalentCulture)