The Great Resignation shows no signs of slowing, and new research indicates it will take more than pay raises to keep workers happy.
As job quits hover at record highs and an inflation rate above 7% continues to eat away at wages, a new study by the Federal Reserve Bank of Atlanta finds that higher pay alone isn't necessarily going to attract new employees or stop existing ones from quitting.
According to the study, higher wages aren't as effective in pushing millennial and Gen X workers to take jobs as they were for baby boomers when that group was the same age.
The researchers say that to fill jobs today, employers must ramp up "nonwage incentives," meaning better benefits and worker-friendly policies. Instead of simply bumping up pay, "employers might be better served by focusing more on nonwage incentives, such as letting workers decide where and when to work," the study notes in its conclusion.
Perhaps it should come as no surprise, then, that major employers such as Target are announcing that they will simultaneously be offering higher pay and improved benefits to attract and keep employees.
The study compared the labor market decisions of each generation when it was between 20 and 40 years old and found that millennials’ decisions to enter the labor force were roughly three-quarters as responsive to pay changes as boomers’ decisions, while Gen Xers’ decisions were only half as responsive.
That means that it now takes a much larger pay bump to encourage younger generations to take a job (or stay in a job) than it took for boomers to make the same decision.
While the Atlanta Fed's Julie Hotchkiss notes in her forthcoming paper that it's difficult to pinpoint the exact reason why this is the case, she notes millennials and boomers have had very different experiences of the workforce as the came of age (millennials are more likely to have grown up in dual-income households, for instance). It's also worth mentioning the fact that employer-sponsored benefits like pensions were much better for workers several decades ago.
Overall, though, “these [generational] differences are not good news for employers trying to coax workers back into the labor market during a robust pandemic recovery,” the report states. “Employers will likely have to also resort to nonwage incentives to entice workers to fill their open jobs.”
Better job benefits to attract workers
A “nonwage incentive” is a job perk unrelated to salary. Think: insurance, paid time off, flexible scheduling and other benefits that have become more important than ever amid a historically tight labor market.
Recent data shows that pandemic pay gains have been largest for the country’s youngest workers, but those raises might not be enough to help the labor market return to normal.
Many employees now expect to have the option to work from home at least a few days of the week. In a study by the research firm Jefferies last fall, 31.6% of workers who had recently quit their jobs said that a four-day workweek would have convinced them to stay. (Though money wouldn’t have hurt either: 42.8% said a raise would have been enough to keep them at the job). In a September survey by Betterment’s 401(k) Business, 65% of people said they could be convinced to leave their current job for one that offers a better retirement plan.
Employers are listening: A recent survey from the Federal Reserve Bank of Richmond found that a majority of companies with more than 500 employees are now offering work-from-home benefits in order to recruit new workers, while a third of companies polled by insurance Firm Willis Towers Watson said they are considering adding student loan repayment assistance for employees this year or next. Employers like Amazon and Target have recently boosted programs that pay for college tuition and textbooks for workers.
Target said this week that it is expanding access to health care and retirement benefits for its workforce while raising its starting pay to as much as $24 per hour in some markets. Major firms including Adobe, Bank of America and Nestle are touting their paid leave benefits on social media too.