According to a new survey from RSM US LLP, in conjunction with the U.S. Chamber of Commerce, two thirds of middle market companies expect to increase hiring levels this year, a record high since 2015.
The findings, part of the RSM US Middle Market Business Index Special Report on the workforce, show the persistently tight American labor market is forcing firms to invest in productivity-enhancing technology while optimizing other strategies through human capital management, officials said.
“A shrinking labor force will define the economy in 2024 and remain a key challenge for businesses for the foreseeable future,” Curtis Dubay, Chief Economist at the U.S. Chamber of Commerce, said. “To adapt, we see businesses of all sizes and sectors working with a smaller workforce by making investments in new technologies like automation and AI, as well as upskilling and reskilling, embracing flexibility, and filling open roles by hiring previously overlooked talent such as veterans and military spouses, formerly incarcerated individuals, individuals with disabilities, and retirees seeking to re-enter the workforce.”
The report found that 97 percent of the survey’s respondents said they expect the lack of available and qualified workers to be a problem over the next year, and that 66 percent said they foresee problems filling open positions. Officials said the contrast between hiring intentions and available workers shows the need for a comprehensive approach that focuses on digital transformation, compensation and benefits, and human productivity.
Additionally, the study found that a majority of executives planning on increasing their capital outlays over the next six months, with 57 percent of executives saying they plan on investing in automation or IT in the next year, with more than two-thirds (85 percent) saying they will use capital investments to increase the efficiency or productivity of employees. Twelve percent said they expect to use IT or automation to substitute for labor, while 62 percent saying they plan to or are considering investing in process improvements or re-engineering. The report noted that most of the labor activities that can be replaced by automation or IT already has been.
“The labor market is cooling but will remain tight by historical standards for the foreseeable future,” Joe Brusuelas, chief economist with RSM US LLP, said. “The onus continues to be on middle market companies to navigate persistent staffing challenges in pursuit of profitability. It is essential that firms attempt to get ahead of the curve and identify the proper mix between labor and investment capital to create the conditions under which they can grow, anticipate and meet future demand.”