Part 1 of this article discussed the increased costs many contingent workforce programs are facing amid the pandemic as some workers command higher wages. While staffing firms have been scapegoated in some instances, supply-and-demand and other factors are at play. While healthcare staffing has gained the most headlines, other industries are seeing increased labor costs as well, and there are significant variances across locations and skill sets.
In the third quarter of 2021, wages and salaries rose by 1.6%, according to the US Bureau of Labor Statistics. The Associated Press reported it was the largest increase in at least 20 years. Looking at the entire 12 months ended September of this year, wages and salaries jumped 4.6%, according to the BLS. In comparison, they had risen 2.7% in the 12 months ended September 2020.
Separately, US hourly wage growth hit 4.07% in November — the highest in at least 10 years — according to the “Paychex|IHS Markit Small Business Employment Watch” report. It noted hourly earnings growth has risen steadily since June when it was 2.99%. The fastest-growing sector was “leisure and hospitality.”
“The positive gains in hourly earnings growth show that employers are responding to tight labor conditions with higher wages,” Paychex CEO Martin Mucci says.
There were differences in growth by area. While hourly earnings growth in Denver was 5.91% for the 12 months ended in September, it was only 2.68% in Baltimore.
Wage issues are impacting the contingent workforce as well.
“What we’re seeing is just a lot of volatility, generally, in the markets for contract labor,” says Steven Williams, senior VP, product management, at Brightfield, which operates the TDX platform that measures contingent workforce data on risk, quality, efficiency and cost. “It’s been playing out in ways that are not always predictable.”
Demand for contingent nurses, in particular, has been on a roller coaster, Williams says.
In early 2021 there were twice as many contingent nurses on assignment as before the pandemic, he notes. There was a spike in demand for contingent nurses in March 2021 with an average increase in hourly billing rates across nursing job titles of 8.8% from April 2020 to April 2021. However, supplier markup increased very little, on average 1.0% across nursing roles, suggesting most of the bill rate increase was passed on to the worker. There was another spike in demand for new contingent nursing assignments in July 2021. Overall, nursing bill rates across 2021 have been volatile, generally increasing, with the impact very specific to geographies.
Looking at industrial staffing, Williams says it’s more of a secular change as the economy recovers and demand for workers increases. He notes contingent bill rates for industrial positions have risen 23% since the first quarter of 2020, though that is across all industries and regions of the US.
Some IT roles are also seeing higher bill rates. For example, according to Brightfield TDX data, hourly bill rates for expert-level Oracle developers in large US cities were on track to be $145 per hour. Bill rates for expert-level contingent mobile app developers in large cities were on track to hit an average of $131 per hour.
Still, IT bill rates are flat overall. One reason is that bill rates vary significantly by skill and region, says Jason Ezratty, co-founder, chief data scientist and chairman at Brightfield. Some skills are more in-demand than others.
The more granular a buyer gets when asking questions about bill rates, the better.
And in some cases, buyers are overcompensating to get the right IT workers immediately, Ezratty says. Even if they are overpaying by 20% for a developer on a contingent basis, that developer’s assignment will only last six, nine or 12 months. They are not locked into a high salary for a permanent worker.
But it’s not just about rates.
Brightfield notes it’s taking 41% longer to secure a contingent worker in the US. The time to find, vet and onboard a contingent worker rose to 41 days in the third quarter from 29 days in the fourth quarter of 2020. And, surprisingly, there is no overall correlation between paying higher bill rates and finding a contingent worker faster.
Still, while increasing bill rates across the board does not correlate to faster time-to-fill, Brightfield’s analysis does suggest that for some roles (and locations) currently, there are material returns to increasing bill rates. One example is full-stack developer. Increasing bill rates by 25% reduces time-to-fill by 34% for these workers. In another example, increasing the bill rate by 25% for an IT program manager reduces time-to-fill by 28%.
Location, Location, Location
Bill rates do vary by skill and region. Some companies are turning to non-IT hubs for IT talent — smaller cities such as Minneapolis; Raleigh, North Carolina; and Greenville, South Carolina — where the costs are lower
Some organizations see supply and demand along with wage pressure for contingents easing in the months ahead. However, looking at the total employment pictures, not just for contingent, some see wage pressure continuing.
The Conference Board’s Employment Trends Index rose sharply in October — and while that points to employment growth, it may also point to continued labor shortages and rising wages.
“As the negative economic impact of the Delta variant subsides, spending on — and employment in — in-person services should continue to recover toward pre-pandemic levels,” said Gad Levanon, head of The Conference Board Labor Markets Institute. “In other words, labor shortages may not go away. In such an environment, significant upward pressure on wages may become the new normal.”
These comments from The Conference Board preceded news of the Omicron variant, which could likely add a new wrinkle to the ecosystem.