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Regional Matters

December 18, 2020

2020 Special Survey of Wages and Hiring

Introduction

Every November for the past several years, the Richmond Fed has conducted a survey of businesses asking about their future expectations for employment, their plans for hiring, and their recent use of wage increases to attract workers. This year, the survey included questions about how the coronavirus pandemic has affected firms’ experiences and expectations. One hundred and seventy-four respondent firms confirmed that uncertainty about COVID-19 is hurting hiring plans and they are still struggling with similar hiring challenges as in previous years, such as finding skilled workers.

Employment and Hiring

While most firms anticipate leaving employment unchanged over the next year, a slightly larger share of firms expect to decrease employment over the next 12 months than in previous years. About 34 percent of respondents anticipate increasing employment levels in 2021. They report that the most important factors for this expected expansion are anticipated sales growth and current employees being overworked.

This year, expectations for growth need to be contextualized by the employment losses that businesses endured due the pandemic. Although some firms anticipate employment expansion in 2021, a substantial portion of them report that they will only be returning to early 2020 levels.

As of November, 55 percent of respondent firms had not yet returned to pre-COVID-19 employment levels. Twenty-six percent foresee achieving a full recovery by November 2021, but 24 percent expect longer-term challenges in returning to previous employment levels. Five percent do not expect to ever return to pre-COVID-19 employment levels.

In addition to future employment expectations, we asked what factors are hurting firms’ hiring plans currently. Most respondents (57 percent) affirm that uncertainty surrounding the coronavirus is restraining hiring. But businesses are also still struggling with issues they reported in years past: 33 percent of firms identified an inability to find qualified workers with required skills as an obstacle for planning to hire. In fact, 40 percent of firms have tried to make new hires recently but were inhibited by a lack of qualified applicants. The inability to find skilled workers has been cited as hurdle to hiring for the past several years of this survey.

Firms are concerned about keeping operating costs low (41 percent) and expected growth of sales being slow (40 percent) when considering hiring. These previously reported difficulties have been compounded by COVID-19.

Wages

Half of the surveyed firms tried to retain employees by boosting wages, either for select job categories (30 percent) or with widespread pay increases (22 percent). Six percent of respondents had to cut some wages in order to retain or recall (from furloughs) a larger share of their workforce.

Aside from wage increases to retain current employees, we asked respondents about using wages to attract new workers. About two-thirds of respondents who were recently hiring (96 firms) reported offering higher starting wages for some (40 percent) or most (27 percent) job categories.

Conclusion

Despite losing workers this year, surveyed firms largely expect to leave employment levels unchanged in 2021. Some businesses are hoping increase employment – many of which are recovering to pre-COVID-19 levels – but are grappling with uncertainty about the virus, low sales growth, and wanting to maintain low operating costs. On top of previously reported concerns, like being able to attract qualified, skilled workers, many firms are trying to manage retention and hiring decisions during uniquely challenging times.


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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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