The world of work moves fast and keeping up can be a challenge. That’s why UKG invests in dedicated teams of workforce researchers, social scientists, futurists, and data analysts to ensure we continue to serve our customers as strategic business partners. We believe that insight into current events and emerging trends are critical to business continuity and agility, and that HR leaders are often too busy to keep up with daily newsletters. We’re here to help.
In this “HR News You Can Use” series, we’ll unpack the top three to five takeaways from the previous month in a digestible, easy-to-read format. Here are the key happenings from August.
1. Fed’s inflation and workforce success
We seem to be seeing success in combating inflation following the Federal Reserve’s aggressive interest rate increases. The Consumer Price Index was unchanged in July 2022, after rising 1.3 percent in June and 1 percent in May. The index for all items in July 2021 is still 8.5 percent above July 2022, but that figure is down from the 9.1-percent year-over-year increase the previous month.
The economy has contracted for two straight quarters, which is a long-held informal definition of a recession, but economists and analysts believe strong employment has shielded the economy from feeling detrimental impacts. Indeed, despite widespread concerns about a looming (or existing) recession, the national unemployment rate fell to 3.5 percent in July, which is 1.9 percentage points lower than it was a year earlier. But highly publicized layoffs in technology and finance are causing concern along with anecdotes of widespread hiring freezes and cutbacks.
After 18 months of historic talent shortages, policymakers have been attempting to engineer a slight cooling of the labor market; the Fed expects the unemployment rate to gradually rise from current 50-year lows to 4.1 percent by 2024. The hope, of course, is that the slowdown will come from the form of fewer job postings and hirings as opposed to job cuts and layoffs.
UKG’s most recent Workforce Activity Report further validates an economic “soft landing.” By analyzing weekly shift work trends across 35,000 U.S. businesses and 4 million employees, this index provides directional insight into the health of the frontline working economy. This report found very slight declines in workforce activity in four out of the last five months, including a 0.6% decrease in July. The Workforce Activity Report’s data does not indicate broad-based layoffs, and the Bureau of Labor Statistics data shows there are still two open U.S. positions for every one person looking for work.
What this means for employers: Expect to see a continued decline of job openings, which have been on a downward trend since April and recently hit their lowest levels since September 2021. Fewer job openings should have a net positive impact on employers by reducing bidding wars for talent and the mass voluntary resignations that have made hiring and retention so challenging across nearly all industries and company sizes.
Yes, but: Openings are still at historically high levels, and many economists believe pandemic-era benefits and wage growth are here to stay. The past two years have also proven the advantage people-first companies have over their competitors; in 2020, the 100 Best Companies to Work For outperformed the market by 16.5%. Even—perhaps especially—in times of economic uncertainty, employers must prioritize taking care of their people. With rare exceptions, successful companies are run by happy employees.
2. Inflation Reduction Act signed into law
Earlier this month, President Joe Biden signed H.R. 5376, also known as the Inflation Reduction Act (IRA) of 2022, into law. This $370 billion package of legislation introduces sweeping changes across taxation, healthcare, and energy, and Biden has called it “the biggest step forward on climate ever” and “a godsend to many families” struggling with prescription drug costs.
The bill is expected to help the United States cut greenhouse gas emissions by an estimated 40 percent below 2005 levels by 2030 and could lead to high-paying jobs in the clean-energy economy while giving both consumers and companies incentives to go green. The bill will also allow the federal Medicare program to negotiate prescription prices of certain drugs with pharmaceutical companies, potentially lowering prices, and extend premium subsidies for the Affordable Care Act’s individual marketplace.
The package will be paid for by increasing taxes by approximately $300 million, primarily through imposing new taxes on major corporations and narrowing the scope of tax loopholes and evasion for both companies and high earners. The law includes a new tax on certain corporate stock repurchasesand a 15 percent minimum tax on certain corporations earning more than $1 billion annually.
The consensus among most economists is that the bill will not meaningfully reduce short-term inflation, but that it could have positive long-term impacts. The nonpartisan nonprofit Committee for a Responsible Federal Budget says this will become the largest debt reduction law in more than 10 years. Critics argue that it’s a recipe for more spending, higher taxes, higher prices, and an army of IRS agents targeting the middle class. They also argue that higher taxes on oil and gas development will ultimately increase energy costs.
What this means for employers: Obviously, the 15 percent minimum tax and 1 percent tax on stock buybacks will have implications for large C corporations, and potentially employees who earn a high percent of their wages through stock options. Most Wall Street analysts don’t expect this legislation to dramatically affect company earnings or future investments—but many critics vocally disagree.
The ability for Medicare to negotiate pharmaceutical prices could also indirectly impact employers. Some analysts believe that if these negotiations lead to reduced revenues for drug manufacturers, they may increase costs on group health insurance plans—such as the ones most employers participate in—to recuperate lost profits. Health insurance inflation has been a huge thorn in employers’ sides for years, and Mercer predicts U.S. employers will see medical plan costs per employee rise an average of 5.6 percent in 2023.
At the same time, the IRA’s extension of premium subsidies brings added stability to the Affordable Care Act’s individual marketplace, which could ultimately attract employers. Several federal efforts have focused on employers’ ability to waive traditional group health insurance plans, including the Trump administration’s 2020 regulations which allowed employers to instead provide employees with funds through tax-exempt health reimbursement accounts (HRAs). This option has primarily been utilized by small and midsize employers, but anecdotal evidence suggests larger employers are beginning to consider them, too.
Yes, and: Some experts have compared traditional group health plans to pensions, and HRAs to 401(k)s. The shift to 401(k)s in the private sector has transferred the burden of saving and investing for retirement—as well as the risk involved—to employees and is widely credited for the current “retirement epidemic.” While transitioning to an HRA could potentially reduce healthcare costs for employers, there’s also the potential that this would further reduce employee health and wellbeing in an age when burnout, mental health concerns, and physical disease are already at critical levels.
3. “Quiet quitting” takes the internet by storm
In the latest viral TikTok-induced trend, employees and leaders are hotly debating whether refusing to go above and beyond at work is a hallmark of lazy employees or an example of setting boundaries to improve wellbeing.
In this way, “quiet quitting” is a misnomer; in most uses, the term describes showing up, fulfilling your job duties, not taking on additional work, and then fully disconnecting. But this is where agreement diverges: Is this doing the bare minimum to not get fired, or completely fulfilling your responsibility as a competent and high-performing employee? How would you rate an employee’s performance who did everything they were expected to do, and well—but nothing more?
While the behaviors “quiet quitting” describes is nothing new (a less-trendy way of saying this could be “slightly disengaged,” though I suppose that’s missing some of the nuance), it’s not surprising that we’re having this discussion right now. In many ways it’s a natural evolution: pandemic-era burnout and mental health issues led to the Great Resignation, which is now beginning to subside in the face of economic uncertainty. When workers don’t feel comfortable leaving their jobs—yet are still feeling overwhelmed and out-of-balance—it makes sense that they’d look for ways to maintain job security while carving out a better work-life balance. “Quiet quitting” could check these boxes—a retaliation against American hustle culture.
What this means for employers: At the heart of this discussion is a phenomenon known as the psychological contract. Human beings have psychological contracts with every person or entity we interact with, whether we realize it or not. This contract is the unwritten rules of what we expect to give and what we expect to receive. We have contracts with our spouses, our children, baristas at Starbucks—and yes, our employers. If there’s a perceived breach in this contract, someone becomes unhappy.
Just as employers and leaders have expectations of their people, their people have expectations of them. And many employees today feel like their leaders have let them down. A March 2022 Gallup poll found that just 24 percent of Americans thought their managers had their best interests at heart. Many studies suggest that the Great Resignation was partly fueled by displeasure over how companies took care of their people during the pandemic. When employees don’t feel like their company cares for and is taking care of them, they’re much less likely to care about going above and beyond for the company.
Yes, and: I encourage leaders to challenge their beliefs about this “quiet quitting” phenomenon. Do employees always need to be volunteering for more to be high performers? Or is their responsibility to do their jobs as described? What about “high potential” employees? Must they exhibit a desire to continue taking on more and growing, or can they have a high potential within their current role? Employees will always fall along a bell curve of ambition, and eagerness to go above and beyond doesn’t always translate to performing core responsibilities better. The answers to these questions might look different for different teams—but they’re important to consider.
But, but, but: Considering current economic uncertainties, it certainly behooves employees to clearly demonstrate their value. Both managers and employees should ensure clearly defined goals are agreed upon for performance evaluations, using SMART KPIs (specific, measurable, attainable, relevant, and time-based). Fair or not, employees must recognize that many leaders could view “quiet quitting” behaviors as indicative of an employee who is checked out, a flight risk, or a liability. If it appears like you’re working less hard than your colleagues, it’s in your best interest to come to the table armed with metrics that prove that quantity is not the same as quality.