The last business days of October 2021 showed job openings in the U.S. increased to a staggering 11 million. However, the number of hires remained virtually static at 6.5 million, bringing the country’s labor shortage to 5.9 million.
Questions linger across the board: What’s driving the labor gap? What’s the solution for businesses?
This article tries to dissect these timely questions baffling businesses over the past months. Let’s dig deep into the phenomenon that ties all these issues together.
‘The Great Resignation’
Signs are pointing to one trend sweeping industries at present: “The Great Resignation.”
Anthony Klotz, Texas A&M University professor, first spoke about the trend in May 2021. In coining the term, he pointed out four main factors that ushered employees to the exit door during the pandemic:
- Workers who had long wanted to resign before the pandemic finally did so when the outbreak happened
- Employees, particularly in the healthcare, food service, and retail sectors, have experienced burnout
- Workers experienced “pandemic epiphanies,” which drives them to pursue new careers and purposes
- Employees do not want to return to offices after working remotely for a long time
Indeed, in September 2021, the U.S. saw its record-high resignation with 4.4 million people leaving their jobs. And as mentioned, in October 2021, there were more job openings than job seekers.
As the labor gap worsens and “The Great Resignation” persists, the clamor around a 32-hour workweek grows louder.
High Demand for 32-Hour Workweek Prompts Lawmakers’ Support
In July of 2021, Representative Mark Takano of California introduced the 32-Hour Workweek Act (also known as the Four-Day Workweek Bill). The bill entails the amendment of the Fair Labor Standards Act to reduce the national standard workweek from 40 hours to 32 hours.
The act would require employers to pay non-exempt workers for overtime once they exceed 32 hours of work in a week. As of December 2021, the bill has the endorsements of about 100 progressives in Congress and the support of various U.S. labor groups.
Even before the 32-Day Workweek Act was introduced, some companies, such as Unilever and Bolt, had launched compressed work-hour experiments. Many countries, including Japan, Sweden, Spain, and Scotland, are also testing the measure, and so far, have reported positive feedback. In Iceland, the pilot of the four-day workweek was considered an overwhelming success.
Analysts reported that employee productivity did not decrease amid the shortened work period. The trial implementation has also significantly reduced stress and burnout among employees, increasing their positivity and happiness at work.
With the positive reception of shorter work hours on the employees, it can, indeed, be one sensible solution to the ballooning labor shortage. There is no doubt that it will also bring remarkable benefits to businesses.
The question is, are these enough to offset the possible downsides for businesses? To answer this, we must first understand what the Four-Day Workweek Bill could mean for businesses.
The 32-Hour Workweek Act: The Good and the Bad for Businesses
#1: Support May Become Less Available for Customers
Advocates of the 32-Hour Workweek Act believe that it is possible to achieve—or even exceed—the same level of productivity in fewer hours. This point makes perfect sense for industries or positions that, by nature, gauge productivity based on output. But what about jobs that require someone to be present on specific hours, such as customer service and other frontline positions?
In such industries, a fewer workforce would mean less availability of support for customers—and with the state of the global market competition, this response could instantly lead to customer churn. According to a Microsoft study, 90% of Americans say customer service impacts their decision in choosing and staying with a brand.
Another option that can be explored is the implementation of staggered shifts. But larger organizations might find pulling this model off extremely challenging. Take Kickstarter, for example.
Recently, the Brooklyn-based benefit company announced its plan to implement a four-day workweek trial in 2022. But Aziz Hasan, the company’s CEO, already foresees possible cracks in the model.
In a Wall Street Journal article, he mentioned that because Kickstarter has to meet some demands in real-time, including from clients who need customer support, the four-day workweek experiment might require staggered scheduling, which could create communication problems.
#2: Businesses May Scale Down Operations to Keep Salaries at a 40-Hour Level
As “The Great Resignation” further stretches, the talent shortage, wage and salary rates continue to surge, putting many businesses at risk of exhausting financial resources. Compared to a year earlier, wages in the U.S. increased by 4.2% in three months through September 2021—recording the most significant hike in three decades.
Once the 32-hour workweek becomes a national labor standard, businesses will be mandated to pay overtime to every employee who spends more than 32 hours or 5 days at work per week. Employers may be forced to cap the overtime hours that staff can render to control costs. While this direction can help businesses mitigate expenses, it can significantly impact work delivery.
For industries that need to adjust to fluctuating demands, putting a lid on overtime hours is essentially equivalent to scaling down. Companies might have to forgo opportunities that could otherwise promote growth and competitive advantage with insufficient headcount to handle peak workload periods.
#3: Projects May Take Longer to Accomplish
Any sensible business leader would agree that longer hours do not necessarily equate to higher productivity. But the reality is, some jobs simply require one to put in hours to complete the work or project on time.
In such situations, businesses may be forced to ramp up targets to get more things done within a shorter period. However, the quality of work or project output will likely suffer. This measure may also defeat the purpose of the 32-hour workweek, which is to address employee burnout and stress.
How Offshoring Could Be the Ideal Compromise
Businesses may end up in a vulnerable financial place even with the prudent measures above. Whether a company decides to scale down operations to minimize expenses or increase headcount to ensure adequate coverage will put an enormous financial strain.
Employers will then have to face the same issues they currently experience with the labor shortage—high costs, supply chain disruptions, and low top-line growth.
So what can employers do? Is there a solution to counter the possible impacts of the well-intended bill on businesses?
Finding the Middle Ground Through Offshore Outsourcing
Whether the standardization of the 32-hour workweek pushes through or not, the general landscape of work will look significantly different from how it was a few years ago. As Rep. Takano puts it:
“After a nearly two-year-long pandemic that forced millions of people to explore remote work options, it’s safe to say that we can’t – and shouldn’t – simply go back to normal, because normal isn’t working.”
Businesses will have to explore practical ways to adapt to evolving workplace dynamics to remain relevant and maintain a competitive advantage. One option worth exploring is offshoring or the practice of delegating some functions to a third-party service provider based overseas.
The Philippines—known as the world’s top outsourcing and offshoring destination—still follows a 40-hour workweek (as of writing). Supposed the Four Day Workweek Bill pushes through. Businesses that outsource to the Philippines can implement a 32-hour workweek to their onshore team while having their offshore team on a 40-hour workweek.
What Are the Benefits of Outsourcing Onshore?
Some of the advantages businesses can acquire through offshoring are:
- Cost Savings – By offshoring non-core functions and other repetitive tasks, businesses in the U.S. can reduce labor and operational costs by up to 60%.
- Competitive Edge – Companies that outsource in the Philippines can maintain—or even increase—their current scale of operations even as they operate with shorter hours onshore.
Offshoring benefits employees, too. Organizations that outsource offshore afford their onshore employees the following:
- Less Pressure and Stress – Offshoring helps minimize stress at work. By delegating time-consuming tasks offshore, businesses can ease a great deal of pressure off their onshore employees and enable them to focus on their key expertise.
- Opportunities for Collaboration and Engagement – Functioning as an extension of onshore teams, offshore outsourcing employees maintain a collaborative relationship with internal employees. This dynamic fosters creativity, engagement, and a positive workplace outlook.
- Manageable Workloads – With ample headcount to cover peak hours and a spike in work volumes, businesses need not increase targets and risk exhausting their current employees.
Through offshoring, U.S. employers can minimize employee turnover and attract new talents by providing favorable work conditions, while gaining a significant cost advantage.
Experience Offshoring Advantage With SuperStaff
SuperStaff has been making a significant mark in the offshore outsourcing industry for more than 13 years. We enable businesses to respond effectively to modern business challenges with two fully operational headquarters in the Philippines and diverse offshoring expertise. Please schedule a consultation with us to learn more about our outsourcing and offshoring solutions.
