COVID-19 and the changing labor market

The casualties of COVID-19 are well-known by now: travel and tourism shedding jobs by the thousands, airlines grounding fleets and making even executive leadership redundant, supporting industries such as hospitality and retail slashing head count. International institutions such as the World Bank have forecast serious long-term consequences as millions find themselves not only out of work, but unable to recover employment for a long period of time.

Less obvious are the trends in hiring and the changing nature of jobs: the industries that are still doing well or at least continuing unchanged, the evolution of job models to better meet business needs and constraints, even the demographics of who is more likely to be employed or unemployed. In this time of disruption, employers, job-seekers, and even policymakers need to change their approach to hiring and employment.

The industries that continue to hire: health, technology, essential services

The pandemic has sent the demand for talent skyrocketing in certain industries. Healthcare has shot to the top of the list, with the most job openings among industries in many countries. One analysis by McKinsey in the US found that out of the top 15 occupations that saw an increase in job postings since the pandemic started, 8 are healthcare-related—10 if R&D-related roles, and interpreters for healthcare services, are included under the healthcare umbrella.

Technology is another big hirer, partly due to the huge switch to working from home. The International Labor Organization estimates that approximately one-third of jobs around the world can be done from home under normal conditions, and even though not all of these might involve telework, the demand for infotech-related services has soared. Within Asia, observations by global recruiter Randstad suggest that both SMEs and large businesses in the technology industry are stepping up their hiring in anticipation of ongoing demand for their services. The focus in this sector is mainly on professional roles such as technical and sales.

Other essential services are also hiring. Industries related to transportation of goods continue to need manpower, because global trade continues despite the tourism crash: the maritime sector in Asia, for instance, is hiring as per normal this year despite the pandemic, and firms in the industry have even started planning for next year's hiring as well. Logistics has similarly displaced retail and hospitality as the top hiring sector in many countries as consumers shift their spending online. And e-commerce, of course, is booming—big e-retailers such as Amazon, and their brick-and-mortar supermart cousins, have made headlines in recent months for opening up thousands of jobs to workers from other sectors.

Job models are shifting towards the non-standard

At the outset of the pandemic, many employers attempted to reduce labor costs by cutting part-time and contract roles first, retaining only their permanent staff in the expectation of economic recovery. This was a strategic move: on the one hand, the most immediately affected industries—travel, tourism, hospitality, and retail—primarily employ a large seasonal workforce of contract and part-time staff around a small core of permanent employees, and this contract workforce is usually the first to go. Also, replacing employees can be costly, with the Society for Human Resource Management estimating that replacing an employee might cost up to half of that person's annual salary.

But as the downturn dragged on and became a recession affecting every sector, organizations began converting permanent roles to contract roles, and shortening the length of contracts in order to better control their payroll financing. Full-time roles became part-time; fixed hours became contingent. Figures from Gartner indicate that as of June, 32 percent of organizations are converting permanent roles to contingent ones, a move that allows them to reduce not just salaries but a whole range of benefits that would otherwise be expensed to the payroll.

And this is just the tip of the iceberg. As employers attempt to make their workforce more flexible throughout the uncertainty and disruption of the pandemic and beyond, they will start turning towards more non-standard job models such as talent sharing—essentially lending their workforce out to other organizations—or pegging pay to work done. While some roles, such as R&D, require permanency because of the nature of the work, many other sectors that used to rely on a primarily permanent workforce are now slowly shifting towards the hospitality and retail model, retaining only a small permanent core and making all other roles contingent.

What does this mean for employers and job-seekers?

Saadia Zahidi, Managing Director of the World Economic Forum, pointed out in a May report: "The fallout of the pandemic will accelerate digitization and automation across a range of industries and sectors. This calls for new investments and mechanisms for upskilling and reskilling, for both deeply human skills as well as digital skills."

Flexibility and ability to learn were necessities even before COVID-19, but today's situation makes these qualities even more critical. Just within the handful of industries that continue to hire, it's clear that there is still a very wide range of skills, qualifications, and knowledge needed. And as the jobs of the future continue to emerge—heavily concentrated within those sectors and a handful of others, according to one World Economic Forum report—job-seekers will need to be able to pivot towards those roles. In some cases, they will require technical knowledge specific to the industry, or to the role. In other cases, they will need soft skills, creative skills, or leadership skills to complement the digitalization of the industry. All of this calls for upskilling and reskilling, and the capacity to learn.

Employers, meanwhile, need to be ready to pivot their businesses towards the new models that are emerging. In this respect, COVID-19 has been a tremendous accelerant for transformation across all sectors—digital, business, and now workforce. That transformation needs to extend to the workforce: how it is hired, how it is retained, how it is trained or retrained, how it is repurposed and redeployed times of crisis. In the OECD's Employment Outlook 2020 report, Stefano Scarpetta, Director for Employment, Labour and Social Affairs, wrote that "all firms must strive for the reconstruction of a dynamic labor market. Hiring and re-hiring, investment in new technologies and in training for the workforce, and/or continued participation in apprenticeship programmes should take a central role in corporate decisions."

Many employers have already retained jobs to the extent that they are capable; they also need to invest in reshaping those jobs to match the needs of the changing economy, and in the process retraining and redeveloping the people holding those jobs.

At the same time, policymakers have an equally major role in supporting employers, especially the small and medium-sized enterprises that account for the majority of employment in many economies but are also the most likely to shed jobs and cut salaries during hard times. They need to take a greater hand in creating incentives and regulations that will ensure fair treatment for the most vulnerable members of the workforce—women and younger workers, who are greatly overrepresented in the sectors that have suffered the most from COVID-19, and low-wage workers in general, who are far more likely to suffer salary cuts and job losses during any crisis.

Ultimately, despite the pinch of the shrinking economy, businesses need to continue looking ahead, if only because the hiring and people management practices that they develop, implement, and propagate today will shape the labor markets of tomorrow.