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Prepare! The End Is Near

The July 7th issue of Businessweek states that the era of low cost, abundant labor in the U.S. is coming to an end. Perhaps not next year, but certainly within the next three years. (“We don’t expect wage growth to be strong until next year.” E. Aleman, senior economist, Wells Fargo.)
Current labor costs, stable at an average increase of 2.5%/yr. for the past six years, can be expected to rise as companies compete for talent. (Wages increased at an average annual rate of 4.3% from 2001 to 2007.)
The labor market will tighten as the economy grows (Inflation grew by 1.8% in May, the largest increase since Oct 2012.) Union efforts, held down by the recession, will reassert themselves. Employee turnover will increase as your best people leave for better conditions.
Pay increases will not be enough to retain, motivate and attract the talent you need to compete and win. Employees, having been stifled for eight years, will seek to improve not only their financial position but also the quality of their work experience (QWE).
To address this impending change the smart money is not just budgeting for pay increases. They are also developing the company culture by creating a nurturing work environment. They know that within three years employee engagement will play a leading role in their ability to diffuse unionizing efforts and to attract, retain and motivate the best people.
Developing a culture of engagement takes time. Those who prepare now will be in the best position to provide employees with an attractive and motivating balance of extrinsic and intrinsic rewards. Doing so will make them the employer-of-choice in a competitive labor market. And, as a result, they will have the staff that makes them the supplier-of-choice to their customers.
Prepare! The End is Near.

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