What Is Labor Hoarding & Should You Practice It?

In June 2022, nearly 80% of employees were worried about their job security should there be another recession. The economy and the prospects of a recession have taken over workplace conversations and strategies over the last six months, but labor hoarding, a new trend focused on retaining employees, might help ease some employees’ concerns about their job as we head into 2023. Let’s dig into why some companies are labor hoarding, and what it all means.

What is Labor Hoarding?

Despite the term’s existence since the mid-20th century, labor hoarding—similar to quiet quitting—is still a term growing in popularity, and its definition isn’t set in stone.

For now, labor hoarding can be described as the practice of keeping employees within an organization by any means necessary. This includes not firing some employees when companies typically might (in situations like underperformance) and not laying off employees to cut overhead or hit a financial goal. It’s becoming more popular for companies that faced challenges bringing talent back after layoffs in 2020 and 2021 in a tight labor market.

Companies are labor hoarding for a few reasons:

  • The “war for talent” makes it harder to find new employees for a position, especially when it comes to wages and people willing to work certain positions.
  • They’re learning that focusing on retention and helping employees grow in their career path are beneficial to both the employee and the company.
  • The value of an employee who knows the company comes with cultural and financial benefits.
  • If you layoff an employee, it can cost six- to nine-months salary just to replace them. That could wipe out potential short-term financial benefits from a layoff in the first place.
  • They’re still trying to fill roles. If they layoff employees, they’ll add to the number of jobs they need to fill.

Labor hoarding can be viewed, at its simplest form, as focusing more on investing in your employees, morale, and security than cost cutting.

Small & Large Businesses Can Labor Hoard

Labor hoarding is a trend growing across all sections of the economy from small to large businesses.

The New York Times detailed a small business owner in Provo, Utah, who is avoiding firing its employees “at all costs.” Transportation issues aren’t issues anymore. “Infractions that previously would have led to a quick dismissal no longer do,” the article says. And if business drops? The owners “first resort would be to cut hours. Their second would be taking pay cuts themselves. Firing would be a last resort.”

Lael Brainard, the vice chair of the Federal Reserve said businesses “may be more inclined to make greater efforts to retain their employees than they normally would when facing a slowdown in economic activity” because of what they experienced in terms of labor shortages during the COVID-19 pandemic.

While there are large companies who still have to make the tough decision to implement layoffs, others can reap the benefits of labor hoarding. As the economy rebounds back from recession, having people who already know your organization can help you bounce back more efficiently and quickly. If you’re left replacing dozens—or even hundreds—of people who were let go, you may experience a productivity lag as those new employees get up to speed with your business practices.

Do You Have a Recession Plan?

One of the primary ways companies can combat layoffs–and hoard labor–is by having a recession plan. A pillar of that recession plan is investing in your people. Companies can help them grow while they’re not hiring as many new employees. (They can help them grow all the time, for that matter).

Some other tips when building a recession plan include:

  • Be clear and consistent with your communication of plans: Transparency is key here. Keep employees and stakeholders aware of short- and long-term plans.
  • Re-skill and reutilize current employees: Employees across the board are incredibly skilled. Find ways to use those transferable skills in areas that aren’t as affected by a recession. They can also find ways to help your internal and external process improve.
  • Cut costs in areas that don’t include employee wages: Are free lunches and company-wide parties as important as the dozens of people who might get laid off?
  • Find new customers: Finding new revenue streams is important no matter what the economy is doing. Plus it allows your current employees to level up or try something new.

Labor is at the heart of these plans. People help get a company through a recession.

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