For workers in their 50s or younger, the term stagflation may be unfamiliar. But anyone who experienced the combination of high inflation and recession in the 1970s is well-acquainted with this unfortunate economic phenomenon. The factors that produced stagflation are back again today. Businesses will need to evaluate their operations to see what can be optimized to help fine-tune their operations in a challenging economy. Evaluating your HR processes and expenditures can play a significant role in helping your organization navigate stagflation.
Stagflation – Then and Now
During the 1970s, the Fed pursued aggressive strategies to reduce employment after the Vietnam War – even in the face of high inflation. Spending on social programs also rose significantly during this period. At the same time, the oil embargo and rising production costs added to the increase in consumer prices while generating a recession.
Today, the ongoing COVID-19 pandemic represents a major driving force in creating inflation rates not seen since the 1970s, including panic-driven hoarding of staples and supply chain disruption. In addition, multiple rounds of stimulus cash created gaps in many segments of the labor market, especially among essential workers in the service and medical fields.
Recruitment and Retention Challenges
Combined with low unemployment rates, stagflation creates intense challenges for businesses. Rising wages due to inflation combined with the economic uncertainty of a recession can be a nightmare for recruitment. Increased competition means that the best talent commands top dollar, making it hard to compete with other businesses for that talent. At the same time, cost increases often necessitate layoffs, pay cuts, and downgrades in benefits – which may also inspire workers at all levels to look elsewhere. Re-evaluating positions and wages and focusing resources on essential functions helps companies remain competitive for top talent in mission-critical areas. Working with an expert like Employco can help you find more efficient ways to evaluate and train your employees, help optimize your workforce and minimize money spent on retention and recruitment activities.
Need to Streamline Processes and Optimize Workflows
Companies dealing with stagflation must often choose between two problematic options: passing along costs to already cost-strapped consumers or cutting wages and benefits in a tight labor market. One strategy for minimizing costs is to focus on ways to streamline processes and workflows internally to eliminate inefficiencies in your operations. Working with an HR outsourcer, like Employco, can help you find the right places to streamline your workflows or bring on new tools to maximize efficiency and reduce costs. This translates into a more stable, predictable budget while maintaining the same quality in your services and products.
Managing Cost increases and Optimizing Cash Flow
In a challenging economy, companies need to re-evaluate their expenditures and streamline operations to reconcile their circumstances with the economic pressures they face. Innovative approaches to operations, such as outsourcing or automating certain functions, can translate to significant reductions in costs for things you already offer or need. Revising your benefits package to offer more voluntary benefits can help increase your company’s attractiveness to prospective recruits with minimal cost increases. Becoming part of a bulk purchasing group can allow you to offer the same level of benefits at a lower overall cost. Outsourcing your company’s HR functions to a partner like Employco can translate to significant reductions in expenditures – freeing up funds that can help optimize your cash flow.
Employco works with clients to help rein in employee costs and streamline internal processes to keep you competitive in a challenging economy. Contact us today to learn more about how Employco can help your company cope with the oncoming threat of stagflation.