Economic Headwinds Not Cooling the Need for Workers
Record high fuel prices, rising inflation causing a decreased demand for goods and services, and rising interest rates are a few of the reasons why the US economy shrank from April to June. The shrinking economy suggests that we are close to or actually experiencing an economic recession. Typically, a recession means companies lay off employees, but the current economy is far from “typical.” Despite recessionary economic pressures, the supply of workers to provide services or make goods has not kept up with company needs. Yes, unemployment claims are rising due to some job cuts. For example, Twitter and Ford Motor Company have recently laid off employees or reported that they anticipate doing so soon. However, the number of workers claiming unemployment benefits remains below the average pre-pandemic level. The national unemployment rate is near a record low (3.5% in July), returning to pre-pandemic levels. Further, employers created more than 450,000 new jobs per month through the first half of the year, and the number of available jobs is close to an all-time high. However, the labor force participation rate of 62.1% is still lower than the February 2020 pre-pandemic rate (63.4%).
Consider the hotel industry. We are travelling more for leisure since the pandemic has subsided, but hotels are having difficulty finding enough workers to keep operating smoothly. Since June 2019, the number of accommodation workers has dropped by 16%. As a result, some hotels have been forced to discontinue or scale back services including daily housekeeping, bar and restaurant dining hours, and room service. This not only affects the services a hotel can provide, but it also increases the workload and stress on employees who are currently working in the hotels. During the pandemic, hotels were shut down or severely cut their hours of operation resulting in hotel workers being furloughed or permanently laid off. Those who remained employed faced difficult working conditions, reduced hours, and had fewer customers (meaning lower wages and fewer tips). This caused many hotel workers to leave their jobs, contributing to what has been called the “Great Resignation” in the US labor force. Hotel workers are leaving their jobs for employment in other industries, to go back to school, or just stay home.
Questions for Students
What should hotels consider doing from a human resource management perspective to attract and retain employees given the current economic conditions?
Do you think that hotels will continue to have difficulty attracting and retaining employees regardless of economic conditions? Explain your answer.
Note to Instructors
This case provides the opportunity for you to show the relationship between HRM practices and competitive advantage. That is, HR practices can influence attracting and retaining employees, which in turn helps companies (in this case, hotels) gain a competitive advantage (hotels can offer their full range of services, delighting customers and keeping them from going to competing hotels). Some of the HR practices that hotels might use to attract and retain workers relate to recruitment, compensation and benefits, working conditions, use of technology, and training and development opportunities. For example, hotels are offering higher pay, retention and hiring bonuses, allowing employees to track and access their daily wages, encouraging current employees through referral bonuses to refer exemplary servers from restaurants where they dine out, using technology to ease the burden of work (e.g., robots to deliver room service or apps customers can use to check in or request items like extra blankets), expanding benefits, offering more flexible work hours, and providing training and job opportunities needed to help employees improve their skills and develop a career in hospitality.
Sources: S. Cambon & G. Guilford, “Workers Still Wanted as Economy Slows”, The Wall Street Journal (August 4, 2022): A3; R. Maurer, “Unemployment Claims Hold Near 8-Month High” (August 4, 2022) from shrm.org, accessed August 4, 2022; Bureau of Labor Statistics News Release, “The Employment Situation – July 2022”, (August 5, 2022) from https://www.bls.gov/news.release/pdf/empsit.pdf, accessed August 5, 2022; K. King & I. Pacheco, “Shortage of Workers Tests Hotels”, The Wall Street Journal (July 27, 2022): B6.