Horizon Point Consulting

Category: Human Resources

We know HR. Read our Human Resources blog archives for stories and best practices from our work with real clients and personal experiences in the world of HR.

What’s Affecting the Labor Force Participation Rate?

What is the Labor Participation Rate and how does it impact employers and the economic outlook?

According to OECD.org, “The labor force participation rate is calculated as the labor force divided by the total working-age population. The working age population refers to people aged 15 to 64. This indicator is broken down by age group and it is measured as a percentage of each age group.”

There are many factors impacting the Labor Market in 2023 including the benefits’ cliff, boomers exiting the workforce, the rate of working-aged males declining, women leaving the workforce by the millions and the decline in fertility rates.

One reason some workers are deciding not to work or to stay in low paying jobs is the Benefits Cliff. The benefits’ cliff occurs when an increase in someone’s pay triggers a greater loss in public assistance such as food, healthcare, childcare and housing. This happens because public assistance does not gradually decrease as income rises. Instead, it “drops off a cliff” at a certain income. This leaves prime candidates stuck between a rock and a hard place. Some may be quick to fault those not participating because of this or not participating fully (working less than full time in order to keep their benefits), but these individuals are making an economic decision and a wise one at that.

Next, we have the mass exodus of the baby boomers. Boomers made an economic decision to remain in the labor force during the great recession, causing them to begin exiting the labor force much later than historically anticipated. Now, boomers are retiring at a staggering rate. While we are still living in a work world created by the boomers, they are no longer the primary contributors. According to PEW Research Center, the number of baby boomers exciting the labor force has grown by about two million since 2011. Then, from 2019 to 2020 the numbers jumped by 3.2 million.

Why does this matter? Well, this group is often vacating higher level positions in their companies and the transfer of knowledge can be a challenge. Not to mention boomers aren’t being replaced at the same rate of exit and some who are retiring are passing down tremendous amounts of wealth to their children. This creates children that more than likely won’t be filling their parents’ shoes.

According to The Demographic Drought by Emsi male millennials are the next group that are in sharp decline in the labor force. Males have been AWOL since 1980. With boomers having such wealth, it left men not taking on the responsibility of getting a job until after 20 or moving out of their parents’ home either. Another economic decision. Add in the opioid epidemic, and males of prime age are being taken away from the market. Also, among the Millennials, there has been a shift from full-time work to part-time work. The reason for this says Lightcast in The Demography Drought is video games, yes video games!

Men aren’t the only ones we are looking at here. According to the latest Women in the Workplace Study by Lean In and McKenzie & Company, women are demanding more from work and are leaving their companies in order to get it. Some are referring to it as the “Great Breakup”. In addition, childcare prices are soaring and quality care is a challenge to find. That leads to women taking on the majority of the child care responsibilities. Again, this is another group is making an economic decision. Paying for quality childcare is often more expensive than bringing home a paycheck to cover it, so women are opting out. One report found that from 2020 to 2021 mothers took on the majority of child care responsibilities, spending an average of 7.1 hours per day caring for their children.

Finally, BLS.gov shares that population is the single most important factor in determining the size and composition of the labor force. So, what does that mean for the downward trend in US Fertility Rates? There is a growing number of childless US adults who don’t expect to ever have children. Again, are they making an economic decision not to have children? What impact does this have on the future of the Labor Force Participation Rate? Evidence would point to the conclusion that it will continue to decline under these circumstances.

Many people are making decisions based on a variety of factors, including the economics of working, to opt out of the labor force or not opt for full time participation. What does this mean to our macroeconomic situation? And what does this mean for employers? In order for people to opt to enter and remain, we will all have to think about how to weigh costs and benefits of such decisions.

September 12, 2023
Could You Pass a Labor Relations Class?

School is starting back, and that means I’m collecting the latest news on union activity – good, bad, and ugly – for a college-level labor relations course I’m teaching. Each of us at Horizon Point has a unique perspective on the union landscape through our work with various clients and projects, which we’ll be sharing in a series over the next few weeks.

I’m kicking us off with a look at union activity right here in our North Alabama region, featuring a snippet from the 2023 Wage & Benefit Survey. When asked if any employees are represented by a union, only 3% of participating companies said yes:

All of these companies are in the manufacturing industry. Is that surprising? Why or why not? (I won’t grade you on it!)

In the same wage survey, we ask questions about pay practices, compensation, and benefits – these factors contribute to employee satisfaction and whether or not they’ll seek unionization. You may have noticed that big names like Amazon, Starbucks, and UPS have been making news for employee union activity and the sometimes less-than-stellar response from corporate leadership. Workplaces are more advanced than ever before, but sometimes labor practices don’t keep up.

SHRM recently published “The Evolution of HR and Labor Relations” for the Summer 2023 edition of HR Magazine. The biggest takeaway for me? The last sentence:

“The worker of today isn’t so different from the worker of yesterday in terms of their core human needs,” [Steve] Bernstein says. “What people really want in the workplace is to be listened to, to have access to decision-making and to be in a position to at least influence their workplace.”

Stick with us over the next few weeks as we explore further the changing (and stagnant) trends around labor relations and why it matters for YOU.

August 22, 2023
Legal Update 2023
Mid-Year Legal Update

There have been a number of employment law changes in the first half of 2023, so let’s take a look at what has changed.

Federal Changes:

The Pregnant Workers Fairness Act

The Pregnant Workers Fairness Act (PWFA) went into effect on June 27, 2023. It is part of Title VII of the Civil Rights Act of 1964 and requires covered employers to provide reasonable accommodations when an employee has known limitations due to pregnancy, childbirth, or related medical conditions, unless an accommodation would cause an undue business hardship.

PWFA applies to employers with 15 or more employees, just as Title VII does. Under PWFA, the employee must make their limitations known to the employer and includes both physical and mental limitations, even if those limitations do not meet the definition of disability under the Americans with Disabilities Act. Employers are not required to accommodate perceived limitations. PWFA utilizes the same definition of a “qualified individual” as ADA does, meaning that the employee must be able to perform the essential functions of the position, with or without accommodation. However, a major difference from ADA is when those essential functions can be performed. Under PWFA, an employee is qualified if:
1. any inability to perform an essential function is for a temporary period;
2. the essential function could be performed in the near future; and
3. the inability to perform the essential function can be reasonably accommodated
Religious Accommodations

The Supreme Court ruled in the case of Groff v. DeJoy (2023) that when determining religious accommodations an employer must meet more than a de minimis standard for undue business hardship. Up until this decision, the standard for undue business hardship under religious accommodations was a minimal business impact. Now employers must show that the accommodation would be costly, would compromise workplace safety, infringe on the rights of other employees, impacts workplace efficiency, or causes other employees to do more than their share of hazardous or burdensome work.

Severance Agreements

The National Labor Relations Board (NLRB) issued a memo in March to provide guidance in response to their decision in McLaren Macomb in which the NLRB returned to their position that employers violate the NLRA when they offer severance agreements that include a broad waiver of rights. This determination is retroactive and voids the terms of severance agreements previously executed if they include a broad waiver of rights.

I-9 Updates

The revised I-9 Employment Eligibility Verification Form was released for use beginning August 1, 2023. The new form condenses the required information from two pages down to one page. In addition, due to the resulting employment of more remote workers as a result of COVID, and the continuation post-COVID to hire remote workers at a high rate, USCIS has made revisions to the process they implemented during COVID to continue to allow employers a method by which to verify employment documents remotely.

Alabama Income Tax Credit

In June, the Alabama Legislature passed a bill to encourage non-exempt workers to work overtime. Under this bill, for the tax year beginning January 1, 2024 full-time non-exempt employees who work overtime will not be taxed on the overtime wages earned. Employers will be required to report overtime wages earned to the state either quarterly or annually.
August 15, 2023
Application Process 2023

Should you Change your Application Process to make it easier for Candidates?

A couple of years ago, we worked with a client who was having difficulty filling positions. They were using all the right avenues to get the word out to potential candidates, but the pipeline was not working. After surveying several candidates, we discovered the issue was with their extensive application process. It was lengthy and ultimately deterred candidates from completing their application. Fortunately, we helped them streamline by removing some of the steps to apply.

Recently, a close family member applied for a position online and had the opposite experience. During a conversation, he shared that it was the “easiest process” he’d had while applying for jobs. He was asked two questions and had the option to upload a resume. Within a week, he was called in for an interview.

In Alabama, the current unemployment rate is 2.2%. Which means, most everyone who wants to work is already working. This makes it tough for companies who are looking to expand their workforce. Making the application process easier for candidates is one way they can attract future employees. A few weeks ago, I was in a café that had “mini applications” placed throughout their dining area. I immediately took a picture, thinking of our clients & how we can help them increase their applicant pool.

How can you streamline your hiring process? Consider what steps you can remove from the process all together. Save the paperwork for new hire orientation! Let us know if we can help.

August 8, 2023
Re-thinking Pre-Employment Screenings
I recently attended the first Reentry Leader Conference held in Birmingham along with Mary Ila and Emily. It was a great opportunity to hear from leaders around the state on what employers can do to help those who are justice involved become gainfully employed. As part of the conference, we heard success stories from employers who had programs to employ those coming out of the system.

As employers struggle to find talent due to the extremely low unemployment rate, as Governor Ivey stated last week, we need to move to focus attention on the labor participation rate and getting people into the workforce who currently are not. Those who are justice involved make up a large percentage of those individuals.

So I challenge organizations to rethink their use of background checks. I have worked with many clients who don’t fully know why they use background checks and worse yet, don’t have a definitive answer as to what disqualifies a candidate. So how can your organization rethink this and become a second chance employer?
1. Ask yourself why you use background checks. The first question I ask clients is WHY. Why do they use background checks in their pre-hire process. Is there a business need to conduct background checks, are they in an industry where hiring someone with a criminal history could put clients at risk (i.e. healthcare), is it due to contract requirements or security clearances, or is there some other business reason that justifies the need.
2. If you need to run background checks, what disqualifies a candidate? The first part of this question is how long should your lookback be? This will be dependent on why you need to run background checks, but you need to establish a reasonable lookback period based on those business needs. The second part of this is creating a list of what types of offenses will disqualify a candidate and what’s the justification for adding that offense to the list. For example, any type of violent offense may be justifiable, but past drug offenses may not be.
3. Consider what positions you run background checks on. Keep in mind that if you need to run background checks for a justifiable business need, you do not have to run them on all new hires. You can run them only on positions that meet that justifiable business need as long as you are able to justify that decision and that you are consistent in running them regardless of the candidate.
4. Reevaluate. Reevaluate your process every three to five years or as your business needs change.
I also challenge you to use the steps outlined above to rethink your drug testing policy. If you currently run drug tests pre-employment, ask yourself what the business justification is for that, as well as if you still include marijuana in the results. I have worked with many clients over the last few years who have rethought their need to run pre-employment drug tests. If you are in a safety sensitive industry, you should still be conducting pre-employment drug screens. But if you’re not in a safety sensitive industry, ask yourself why you need to run them, why you care if employees are engaging in drug use on their own time as long as they are not coming to work under the influence.

How many candidates could you have hired in the last year if your background and drug testing policies were adjusted to reflect your true business needs?
August 1, 2023