The hiring landscape in the United States is radically different compared to five years ago, and many people are still waiting for the situation to “return to normal.” Unfortunately for those people, data suggests the hiring environment may never revert to its previous state.
Hiring practices have been evolving as long as there have been employers seeking people. The proverbial “cold water to the face” for most companies was the challenge of workforce re-engagement after the COVID-19 pandemic. At the time, anecdotal evidence pointed to massive government handouts as the cause. Many believed Gen Zers moved home with their parents and pocketed generous unemployment benefits they spent day-trading meme stocks. While the $814 billion in pandemic aid intensified the underlying problem, it was not the root cause. Instead, emerging demographic shifts shaped hiring practices for the foreseeable future. Arriving at this point is not a dramatic shift but one that has played out over decades.
The Job-Hopping Trajectory
In the 1950s, the average American held 1.5 jobs in their lifetime. One might ask, “How does someone hold half a job?” To many, it sounds like fiction. Back then, half worked for one company their entire lives, while the other half worked for two. Some worked for two companies mainly because the first one went out of business or moved to another geography, forcing those employees to seek new employment. Companies created defined benefit pension plans to retain employees by promising a full pension after 30 years, providing financial security for retirement. By 2024, the average American moved from 1.5 to 12 jobs during their lifetime. Few, if any, recent high school or college graduates expect to work for one employer for the rest of their lives.
The shift began in earnest during the 1970s when many employers began moving operations overseas and eliminating defined benefit plans. This greatly accelerated in the 1980s when most employers switched their benefits from traditional pensions to 401(k) plans. This was deemed necessary because companies were looking to be agile, and shifting skill sets made long-term employment less attractive.
People slowly warmed to the idea of job and company changes as a means to growth—recognizing both pros and cons. Advantages included companies acquiring the needed skill sets to adapt to accelerated change and employees benefiting from mobile retirement plans. This quick adaptability and high productivity contributed to the American economy’s vibrancy compared to Europe.
However, greatly increased turnover led to higher costs from poor hiring decisions. A bad external hire can cost companies up to 200% of that individual’s salary in lost productivity, training, recruitment and replacement. Promotions from within offered more certainty because the employer had historical performance data.
Fast-forward to Gen Xers, who grew up in an era of frequent company mergers, right-sizing, leaning up and reductions in force (RIF). This generation had less confidence in corporate America and the idea of long-term employment with one company.
Significant Demographic Shifts
Currently, two massive demographics shifts are colliding, causing significant challenges for employers. First is the aging and retirement of baby boomers, the largest generation in the world’s history. They are now aged 60–78, a range climbing higher each year. In addition, the largest number of baby boomers are just now hitting the normal retirement age of 65. Starting in 2024, 11,200 baby boomers are retiring daily, amounting to 4.1 million people a year—a trend expected to continue through 2027—when it will begin to ramp down and normalize. The staggering loss of tribal knowledge by most companies will not be easily replaced.
Second, workforce entry is declining. The Bureau of Labor Statistics projects a 1.4% decline in the average annual growth rate for 16–24-year-olds (part of Gen Z). As workforce exits peak, the number of people joining is at its lowest point. These pressures give job hunters significant leverage and opportunities for personal and professional growth. With 8 million jobs currently posted in the United States and only 6.8 million people unemployed, even if someone waved a magic wand and filled every position, 1.2 million vacancies would remain. The gap widens daily as another 11,200 baby boomers walk out the door for the last time.
Solutions to Help
So, what can you do? A multi-pronged approach is recommended for best results.
First, make your hiring practices faster and nimbler. Use newer technologies such as virtual interviews and AI screening. The days of posting a job and waiting for applicants—a months-long process—are long gone. Speed and efficiency are the keys to success.
Next, invest in developing your existing talent. The more skilled your employees are, the more effective they are at their jobs—creating a win-win situation.
Lastly, cultivate a company culture that attracts, engages and energizes your talent. If your people are not engaged or excited about their roles and opportunities at your company, they will explore other employment options.
Billy Hamilton is Senior Vice President of Human Resources for Motion. He has over 30 years of experience in human resources with companies such as Overhead Door Corporation and Lockheed Martin. He is passionate about talent management and data analytics. For more information, visit Motion.com.