By Wendy Campbell, Principal
Inflation is defined as an increase in the general price level of goods and services in the economy. When the general price level rises, each unit of currency buys fewer goods and services than it did in prior periods. Consequently, inflation corresponds to a reduction in the purchasing power of money.
For the last three decades, inflation has been relatively stable. However, over the last two years, prices have risen at rates not seen since the early 1980s. In March of this year, the Consumer Price Index rose 8.5% compared to a year earlier. Increased food bills, energy costs, and mortgage rates have a real and tangible effect on consumers. According to economists, wages have not gone up at the same rate as inflation in 2022.
From mom-and-pop shops to large corporations, companies of all shapes and sizes are not immune to the effects of inflation. It is not surprising therefore that this economic environment has had a significant effect on the workforce. Job seekers are concerned about their job prospects and what the future holds. In July 2022, Flexjob’s Career Survey looked at the job seeker and job market confidence of over 4,000 professionals – 80% of whom reported that inflation is negatively impacting their work and their job search. This raises the question: How are job seekers in the market altering their career decisions to offset the impact of inflation?
Current Trends
When wages fail to keep pace with inflation, Canadians are forced to tighten their belts or look for other ways to earn money. A number of studies have reported that Inflation has significantly affected the job market and that the following trends have emerged:
- Job seekers are choosing remote positions to reduce gas costs from commuting. The 48.7% growth in gas prices in early 2022 made commuting considerably more expensive.
- Older workers who have previously retired are returning to the workforce because the purchasing power of their retirement savings has declined significantly
- Workers are asking their employers for higher pay to combat the rising cost of living. Canada’s very tight labour market continues to give workers the best bargaining power they’ve had in decades for negotiating raises.
- If employees are unable to negotiate a pay increase from their existing employer many are looking for new jobs to secure more money. 78% of workers told Joblist that they can still make more money by switching jobs. This is occurring at a time when there is confidence that the Great Resignation is still occurring and that the demand for talent is still high.
Looking Ahead
There are many different points of view about what the future holds – will inflation continue to rise? Will we face a recession in 2023? Will unemployment start going up? Armine Yalnizyan, a Canadian economist and writer reported in the Globe and Mail that she expects wage growth will continue to lag inflation and believes there are countervailing forces that make it very difficult to predict where wage growth will go. “I think resignations may begin to slow down in 2023 and as inflation continues to rise some businesses will suffer and perhaps start curtailing hiring.”
The state of the economy and stock market is causing a lot of upheaval for many people. There is concern that as borrowing becomes more expensive, consumer spending will decline which could lead to a recession and potential job losses. Given the unpredictability of the market, some job seekers are feeling urgency now to find jobs before conditions change. According to recent data from Quicken, others are reconsidering their plans to switch jobs this year and are instead putting those searches on hold. It may be a bad time to jump ship.
Others argue that while it is understandable recession fears impact the workforce, hiring will continue in uncertain times. As noted by FlexJobs, the market is proving mostly resilient despite these job seeker concerns. Maurie Backman believes that getting a new job right now is not necessarily a risky prospect. Companies looking to hire clearly have a need for talent and they have the means to pay for it. Economist Santangelo agrees that even though unemployment is expected to increase this doesn’t necessarily mean that hiring will decrease. He expects employers will seek to hire multiple part-time, contract or “gig” workers as a cost-saving measure.
While such conflicting perspectives can be confusing it is important that job seekers take a long-term view of their job search as described by Backman. Making a rushed move to achieve a 10-20% pay rise might feel like the right thing to do financially but compensation is rarely a top motivator in the long term. Think about how a move fits in with your career plan. If you are in a good position workwise and your income is decent then there is certainly something to be said for not causing yourself upheaval at a time when a recession could be right around the corner.
However, if you are unhappy at work or if you feel you are underpaid then you may want to consider changing jobs despite an uncertain economic backdrop. As described in the Human Resources Director companies are still hiring – even during times of economic uncertainty finding a new job or making the move into a different career is still possible by staying prepared, focusing on what you can control and being flexible and open to opportunities.