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April 16, 2014

Just Released: April Surveys Find Businesses Face Increasing Difficulty Retaining Skilled Workers

Jason Bram and Richard Deitz

The Federal Reserve Bank of New York’s monthly business surveys include special supplementary questions on topics of interest. April’s survey questions focused on how difficult it has been for firms in the region to find and retain workers with basic skills, such as math and English, as well as advanced computer skills and “soft skills,” such as punctuality and interpersonal skills. Overall, the level of difficulty finding workers has not changed much since April of last year, when these questions were previously asked. Workers with advanced computer skills were the hardest to find, for both manufacturing and service firms. Manufacturers report much more difficulty than service firms in finding people with basic English, computer, and especially math skills, and even seem to be having difficulty in finding workers that are simply punctual and reliable. Service firms say they’ve had particular trouble finding candidates with good interpersonal skills. These findings suggest that although the job market recovery remains tepid, demand for workers with particular skills is still significant.

Overall, according to the April 2014 survey, the challenges regional firms face in finding workers has not changed significantly since last April’s survey. However, survey results suggest that firms are having increasing difficulty in retaining skilled workers. Roughly 30 percent of manufacturers say that it’s become harder to find skilled workers in recent months, while just 8 percent say that it’s become easier. Among service firms, the results were more lopsided: 28 percent and 3 percent, respectively. These are wider margins than reported in the 2013 survey. And about 37 percent of manufacturing firms and 46 percent of service firms expect it to become even more difficult to retain skilled workers over the next year.

So what about less skilled workers? While roughly 85 percent of firms in both manufacturing and services say that the retention of unskilled workers has not changed, the story among the other 15 percent does vary a bit: while service firms are evenly split about whether it’s become more or less difficult, manufacturers generally say it’s become more difficult. However, a good number of them expect it to get harder to retain lesser skilled workers over the next year.

Finally, the survey indicates that manufacturers expect to raise pay by 2.4 percent for the typical worker over the next year, on average, while service firms expect salaries to rise by 2.2 percent—the same expected hikes as in last April’s survey. Not a single respondent expects wages and salaries to decline.

The results from this survey suggest that the gradually strengthening job market appears to be creating labor shortages, at least in some pockets of the workforce. Interestingly, companies remain reluctant to increase real wages. Why the apparent contradiction? Perhaps part of the answer lies in other forms of compensation: a number of respondents did remind us that they’re spending a lot more than last year on nonwage benefits—mainly health coverage for employees.

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.


Jason Bram is a research officer in the Federal Reserve Bank of New York’s Research and Statistics Group.


Richard Deitz is an assistant vice president in the Bank’s Research and Statistics Group.


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Retaining workers is about competition for labor. If business health care costs are going up, they’re going up for most employers in the same field in similar ways. So this claim is likely a red herring.

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