I was wrong. Hard to admit, especially when I was so certain that I was going to be right, at worst just getting the timing wrong. I predicted that Covid would lead to mass insolvencies, and a fairly big hit to employment and our economy overall. But despite rolling lock downs around the country for 18 months now, this has failed to eventuate. In fact, in many cases companies and people have had record financial years. But we’ve been split into “have’s” and “have nots”. So how do businesses adapt to the new normal, particularly around employment?
Let’s look at one of the key factors of any successful business: people. According to official unemployment figures, in August which was a month into the current NSW and Victorian lock downs our unemployment rate is apparently a ridiculously low 4.6%. Even the more realistic Roy Morgan figures show only 9.5% jobless or about 1.36 million people. Talking to business managers across a range of fields including hospitality and other hard hit sectors, employers are finding it difficult to even get candidates. So the experiences of employers actually match the statistics, but defy logic.
One reason for the reduction in the jobless rate was that a staggering 217,000 people left the workforce and are therefore not counted. Further, for someone to be classified as being employed, they need to have worked just 1 hour in the last week. To get the full picture, we need to add in a further 1.18 million part time people who were under employed and looking for more hours (with a growing portion now having two jobs). There was a further 388,000 people who “worked” zero hours – for instance being stood down. Add all that up, and of the total “employable” portion of the population, 17.7% are unemployed or under employed. That can’t be good for those people or indeed the economy, and remember these figures are from the early part of the NSW and Vic lock downs, so will be getting worse.
The lived reality though is that employers can’t attract good people to grow their businesses. Why?
Firstly, in uncertain times, 30% of people who would “normally” look to change employer aren’t even looking. “Better the devil you know” – if you have a reasonable job, you know the likelihood of the employer staying in business, whereas changing company you don’t know if they are profitable or likely to keep their doors open. In the event of any retrenchments, it’s also likely employers will use a “last in, first out” approach. According to several recruiters, about half those made redundant in the early stages of Covid were unlucky (and have mostly found good new “homes”), the other half were made redundant for a reason, and might very well be the candidates who don’t even return phone calls.
Second, many people are in a job that has been able to continue during Covid. About 20-50% of the population are engaged in the public sector and other “essential services”, with many not affected at all or even having had increases in incomes. Others perhaps accustomed to FIFO roles are trapped in their State. Why change?
Combine these factors and there are actually very few “available” candidates.
Another noticeable trend is that insolvencies are DOWN 20-30% on historical levels. Originally, this was due to the changes in legislation around allowing insolvent trading. But the forecast tsunami of company collapses hasn’t happened.
That has two likely reasons. People in business have to be adaptable and resilient. We’ve all heard terrific stories of café’s pivoting to take away and food delivery. Or retailers ditching the high cost of bricks and mortar towards online, the visible proof being the vacant shops in many centres. Second, many businesses that could see the writing on the wall reduced whatever costs they could, then wound down in an orderly fashion rather than allowing the debt bomb to detonate in a spectacular insolvency.
So what are these former business owners and employees doing now? Some have gone into other segments of the economy. Examples abound of airline pilots now driving trucks or stacking shelves at Coles. Gig jobs like delivery services are thriving. But for many others, we have seen a change in attitudes to all things in life. Working From Home for some people has diverted our attention away from the almighty dollar being our most important aspect of life. Because people haven’t been able to travel like normal or even eat out, the lower spending has not only increased our savings, but also taught many people we can have a comfortable and happy life on a lower income. Many of these people have realised that they can have a perfectly fulfilling life with “hobby” businesses, perhaps combined with part time work at a lower level than they were accustomed to. Work from home has also meant many households have reduced the garage by one vehicle, saving maybe $10,000 per year in household costs. A recent study also indicates that on average people would be willing to trade a 7% pay reduction in exchange for being able to work from home 2-3 days per week.
In the past, the de-industrialisation of Australia was a big factor with Australia’s high labour costs driving demand for goods to come from overseas. This tide has turned. Supply chain issues (unreliable manufacturing overseas combined with shipping costs rising exponentially) has seen the cost of imported goods skyrocket. There is also a desire for local control rather than being at the whim of for instance trade sanctions. This has opened the door for particularly small scale local manufacturing again, for instance in fabrication and similar fields. In the current environment, this has created opportunities for previously unviable businesses to establish yet again on a small scale.
About 5 years ago, the most common question we had when employing any “blue collar” role was “how much overtime can I get”. So to get 120 hours of work, many employers required only 2 people. Now, “lifestyle” requirements are a major driver for many, which means to get the same 120 hours of work employers are generally requiring 3 people instead of the traditional 2.
So the best answer I can come up with for businesses on how to adapt to issues around finding more people is to learn how to do more with less. Keep the good people you have by looking after them. Look at what the key functions of the business are, stop doing “marginal” aspects of the business, and put your resources towards improving efficiencies around your core business. If you are cash strapped, do away with anything “nice to have” and focus on “need to have” assets that will generate income.
Yes, overall our country has been helped by a booming mining industry, a robust construction industry, and a growing agricultural industry to underpin our economy. Plus we’ve amassed mountains of debt that is being passed on to future generations that have ensured safe Government positions and the largest welfare handout ever.
In tough times, people adapt, and it seems like I underestimated the resilience and flexibility of many people who have faced massive disruption. There are still many people and businesses doing it really tough, but the message is that there are opportunities out there. They may not be exactly what we have always done or indeed be obvious to spot, but I’ll take my hat off to all the people who have made a go of it. Well done for proving me wrong!
As always, onwards and upwards!