U.S. employers struggling to fill jobs would be better off offering flexible work arrangements and other incentives to younger workers because pay increases aren’t enough to lure them back to the labor market, according to a study by the Federal Reserve Bank of Atlanta.
Compared with baby boomers of the same age, millennials and Generation X workers are less responsive to wage changes, Atlanta Fed economist Julie Hotchkiss said in research posted Thursday on the Fed bank’s website.
“These differences are not good news for employers trying to coax workers back into the labor market during a robust pandemic recovery,” the author wrote. “Employers will likely have to also resort to non-wage incentives to entice workers to fill their open jobs.”
U.S. payrolls are 2.87 million lower today than in February 2020, prior to the Covid-19 crisis. The labor force, which captures working-age people who either have a job or are looking for one, remains about 900,000 below its pre-pandemic level. Meanwhile job openings and quits rates are hovering near record highs.
The paper, using 2019 data, compared the responsiveness to pay changes of the various generations when each was 20 to 40 years old. Millennials, defined as those born from 1981 to 1996, are currently roughly in that age bracket. Gen Xers, born from 1965 to 1980, are now in their 40s and 50s.
The Atlanta Fed’s Wage Growth Tracker shows median wages have risen more than 5% in the three months ended in January. Yet that trails the 7.5% gain in consumer prices last month, so in addition to generational differences, inflation may be having an effect on labor supply.
An increasing number of businesses are already promoting remote work and other flexible arrangements as a recruiting tool. A Richmond Fed survey published this week found that almost 60% of large companies now use work-from-home options to attract new full-time employees.
This article was provided by Bloomberg News.