States Bank on Incentives, Benefits and Training to Lure Workers Back.

The paradox of the U.S. labor market is that there are more job openings than workers seeking employment. The working-age population is sufficient to fill current job openings, but labor force participation has yet to return to pre-pandemic levels. The pandemic accelerated many retirements and reassessments, and it emboldened workers to request higher pay, greater benefits and more flexibility and training. Employees who remained on the job have experienced burnout and exhaustion as they cover the work created by unfilled vacancies, further exacerbating retention problems. Because these market conditions are likely to persist for a few more years, states are considering several policy options in response.

Hot Topic--Recruitment and Retention

In August 2022, 18 states saw unemployment rates fall below 3%, meeting or beating previous records. While low unemployment may be good news for employees, it places upward pressure on wages and has led to an unprecedented number of workers quitting to seek new jobs.

States are looking to grow their labor forces by engaging with working-age adults who are not currently employed. They're focusing recruitment efforts on historically underrepresented populations, including people with disabilities, women of color and formerly incarcerated individuals. States also are recruiting beyond their borders. For example, Vermont and West Virginia are offering financial incentives to people who move to their states to work. Other states have considered relaxing or eliminating residency requirements.

States including California, Colorado and Washington are embracing wage transparency policies that require job postings to include salary ranges. Other states implemented laws requiring employers to disclose salary ranges by default or upon request during the candidate interview process. These policies typically aim to reduce pay discrepancies among different demographics, but they could also boost applicant interest.

Trending: Retaining Talent

Driven by stagnant wages and burnout, the public sector has been hit especially hard by increased turnover. Excluding higher education employees, state government payrolls are at one of their lowest points since 1993. Lawmakers across the country are raising state employee compensation and expanding workplace mental health supports to relieve burnout and fatigue. Policymakers are sure to continue exploring recruitment and retention efforts into 2023 to boost state economic growth.

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