The new mode of working is “anywhere-work” models for two-thirds of U.S. firms, according to new research from Forrester. This is creating a significant shift in supply and demand in the tech labor market and a “groundswell of options where candidates settle,” the firm said.
Companies have been finding that the labor market for technologists is tight. “Tech jobs have some of the highest attrition rates and are also some of the hardest jobs to fill,’’ Forrester said. However, “for tech workers, the labor market is anything but tight.’’
The bottom line? “Companies that refuse to acknowledge this shift of power to the worker will assume a larger share of the risk and receive little of the reward.”
Workers are leaving costly cities
The biggest point of leverage for workers has been the pandemic, which fully demonstrated that people could accomplish work from anywhere. This has led to population declines in major tech hubs like San Francisco, New York City and Boston because people are leaving these cities for places where their dollar stretches farther, Forrester said.
Some of the main beneficiaries are Texas, North Carolina and Florida because employees are prioritizing work/life balance and compensation over title and base pay, the firm said.
“The tech labor landscape is becoming increasingly nuanced; various economic factors such as cost of living, anywhere work, and the preexisting labor clusters within metropolitan areas are contributing to current labor headwinds,’’ Forrester said. “For future tech labor strategies, technology executives will need to cast a wider net and prioritize employee experience to find success post-pandemic.”
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It is a buyer’s market for tech labor
Because of the high number of job postings, those seeking work have more options today. At the same time, the number of open positions is putting a strain on companies trying to bolster their tech talent.
“Technology executives that continue to rely on traditional tech talent pools and pipelines will begin to see increasing diminishing returns as the labor force embraces greater geographical mobility and career fulfillment,’’ Forrester said. “It is critical for technology executives to look beyond their existing labor markets and create new opportunities to counteract scarcity and lower labor.”
Location is no longer a factor in determining wages
As tech labor becomes more distributed, the recruiting strategies companies use to attract the same talent will become more distributed as well. This places unprecedented wage pressure on local labor markets, Forrester noted.
“Technology executives must source talent that aligns to budget realities and find new common ground with labor pools that reinforce those realities. It is critical to find labor markets that complement costing targets to reduce the risk of wage inflation and accept where those new labor markets are.”
The labor landscape is also influenced by federal and state public policy
As tech labor strategies continue to evolve post-pandemic, tech executives also need to consider public policy at both the federal and state level. Economic development incentives are significantly influencing the composition of talent migration, Forrester said.
“Policies such as the ‘Build Back Better Regional Challenge’ are designed to promote innovation and consider the local tech and innovation infrastructure to accelerate growth in the tech space across sectors,’’ the firm said.
As an example, Forrester cited Iowa as one beneficiary of these policies, because the state just received a multimillion-dollar grant to build out its cybersecurity capabilities.
“The regulatory initiatives are great indicators of where talent will be for the longer term,” the firm said.
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Change labor strategy tactics
Applying the right labor strategy is the difference between success and failure in the immediate and longer term, Forrester said. Because labor market barriers have been removed for the workforce, tech executives must respond accordingly.
“To find the right talent at the right price requires a distributed approach, much like the patterns of anywhere work. The ability to productively source talent from anywhere is now a requirement for IT labor strategies.”
The company offered some tactics to help tech executives and their companies cope.
Adapt to the target talent pools
Assess the current composition of your tech workforce and prioritize roles based on where they fit under anywhere work. Understand which roles remain critical to in-person work, which allow for more flexibility with hybrid work and those able to be fully remote. Each grouping of roles will require different labor strategies.
“The more remote a role can be, the more flexibility the organization has when sourcing talent. The less remote a role is, the less flexibility the organization has when sourcing talent. Understand where the labor strategy can make a case for a premium wage for select roles and taper down from there.”
Resist the urge to mimic big tech, which has deeper pockets
Look to your employee experience as a point of differentiation for candidates when compensation is not enough.
“As our research shows, EX is of growing importance to the labor force, and, at times, can be the deciding factor between the talent the organization is getting and the talent the organization is needing.”
Further, “focus on employee development and engagement initiatives that can help set the organization apart from the competition by creating more opportunities for talent to perceive the opportunity as differentiating.”
Utilize technology as the great equalizer amid growing labor market risk
Tech executives who embrace technologies that not only mitigate current labor risk but also enhance their labor strategy will hold an advantage in the market.
As examples, Forrester cited WalkMe and SkyHive.ai, saying they “can complement the current workforce to increase the productivity of the overall labor strategy. It simply requires a retooling of how talent is sourced and managed to exploit these new capabilities.”