CRE Workforce Dynamics & Hiring in 2022
Author: Forbes J. Rutherford, Principal, Rutherford International Executive Search Group Inc., Managing Director, NEXTalent Marketplace & Job Board, T: 855-256-5778 or Chat
In Q1/20, Rutherford International canvassed 204 multi-sector leaders within Canada’s commercial real estate industry, asking them to forecast the political, economic, social and technological threats they feared most through to Q4/2021. One hundred and twenty of the participants with direct or indirect authority included their staffing details for the same period. Please note, the data collection was completed early on in the pandemic when few of us foresaw an extended lockdown.
This article is the fifth in a series of commentaries that examine potential threats to Canada’s CRE industry, post-pandemic workforce dynamics and the probable impact on industry employment in 2022.
The Great Retirement, a Systemic Exodus
Hiring Challenges in 2022
Of the sixty-five possible threat scenarios we asked respondents to consider, seventy-six per cent of respondents described talent quality and scarcity as ‘somewhat likely or likely’ for 2021. Respondents ranked workforce effectiveness higher at eighty-three per cent. However, none of these three threats scenarios made it into the top thirty of our heat map. Respondents classified all three as emerging threats, implying that they had three or four years to manage the impact of retirement-driven vacancies.
“If Governments Had the Will, They’d Reset the Retirement Age to Sixty-Seven”
As Black Swan’s are known to do, COVID19 arrived with a thud, sending the world into a lockdown, shaking the employer/employee social contract to its core. The West is still sorting out the impact of this reaction, but one critical knock-on effect is the hyper-advancement of the Boomers (and early Gen-X) timeline to retire. Those who can retire are not returning to full-time work. Pundits call it “The Great Resignation” when a more suitable description for this specific cohort would be “The Great Retirement.”
We believe we are experiencing hyper-retirement, with four years compressed into one year. The industry should expect a higher-than-normal spike in Q1/22 retirements once STIP and LTIP compensation programs are received. This subsequent draining of the talent pool will likely compound the economy’s challenge to retain institutional knowledge and result in a further scarcity of quality expertise through 2022/23. There are three possible methods for limiting the impact of this trend, increase immigration, reduce the worker’s ability to fund retirement by inflation or extend retirement to age sixty-seven.
“Chaos Theory – is a branch of mathematics that deals with complex systems whose behaviour is highly sensitive to slight changes in conditions so that small alterations can give rise to strikingly great consequences.”
Retirement Affordability & Standard of Living
There are fundamental truths in economics. The cause of inflation is one of them. Our financial bettors responsible for the money supply attempt to assuage their fear of inflation and ours with semantics, calling it transitory. They’ve known since 2009, QE stimulus plus the fiscal response to COVID19 in Q1/20 would force the Fed to support or devalue the US dollar eventually. If inflation is transitory, it’s only an interlude to eventual recession.
“Two More Years of Societal Disruption”
One can’t live through two years of societal disruption and not realize that there are identifiable willow-the-wisp patterns even within chaos theory. Inflation is one such pattern that will become more visible as displaced private-sector workers react to a reduced standard of living. While inflation selectively targets the neediest, the greater fear is the universal leveller, stagflation. If stagflation takes hold or an L-shaped recovery ensues, governments at all levels should reduce services and headcount. The body politic is at the end of its witts end and won’t tolerate a drop in its standard of living. If inflation is persistent through 2022, the first indices of labour unrest will be the broader public service working to rule and striking to improve compensation and pension entitlement funding.
“A Black Swan Arrived With a Thud”
Pension Funds & Unfunded Liabilities
With an ongoing pandemic, increased retirements, employee disengagement, eco-terrorists influencing industrial and resource policy, unsustainable housing expenses and the CPI rising to historic levels, one is reminded of the enormity of the gap between systemic thinkers and our political policymakers. For example, Canada’s Federal Government edged the retirement age up to age sixty-seven coming out of the 2008 financial crisis. At the time, most pension sponsors and managers agreed this change was actuarially prudent. However, the policy mitigated the impact of the Boomer retirements, only to be turned into a realpolitik wedge issue.
Deficits and health costs notwithstanding, governments have few fiscal bullets left in the chamber to mitigate further economic shocks. Unfunded pension fund liabilities remain at crisis levels. Roll in an unexpected pandemic induced spike in retirements, and it’s reasonable to ask the actuarial authorities responsible for our pension plans if they can fund annual retiree distributions at the levels promised.
“Expect a Higher Than Normal Spike in Q1/22 Retirements”
If the government had the will, it would revisit the idea of resetting the retirement age back to age sixty-seven to offset pressure on the pension plans and keep the labour supply intact. Such a public policy shift would result in a political backlash from senior voters; however, those directly affected would be the long tail of the Boomer Generation. The majority of the Boomer cohort’s birth year has already passed age sixty-seven.
Is 2022/23 The Great Workforce Disengagement?
In concert with the “Great Retirement”, we refer to in this article, the “Great Resignation,” a term the popular press has coined, underscores two years of societal chaos. Perhaps with great swaths of our fellow citizens stepping out, the better phrase is “The Great Disengagement.” Should anyone be surprised when we receive daily reminders as to how moronic our leadership class has proved? Nothing spells mediocrity more succinctly than the media lauded New Zealand prime minister, announcing citizens now have the freedom to let visitors use their bathroom?
Accommodating Societal Neurosis
The reflexive global reaction to the Omicron variant underscores the level of anxiety existing in our Western societies. As a child, I recall school drills where we dropped under our desks when the early warning siren in the schoolyard would periodically announce nuclear oblivion. We were conditioned then, as I believe COVID19 has conditioned us today. Eventually, we will learn to live with COVID19. However, governments and employers will need to accommodate a well-founded societal neurosis, which means finding a way through workforce engagement, retirements and resignations.
It will take another two years of disruption for the emotional scarring to work its way through the system.
.About The Survey & Our Approach
The Delphi approach to soliciting opinions from knowledgeable participants on future outcomes can be highly accurate. Notwithstanding COVID, the aggregate of our 204 survey participants was correct in predicting the near term threats. The challenge in forecasting with a high degree of accuracy two years in advance or, feasibly, even three years takes a unique individual. It’s not an exhaustive list, but we have found that the behavioural traits important to forecasting are consistent with high performing executives. They have agile learning minds, honed intuitiveness, are comfortable in chaos, innovative, reflective and externally aware. This profile is especially adept at long-range forecasts, which in our case means highlighting emergent threats, or what we call ghosts in the machine or blips on the outer rim of the radar scope.
Emergent Threats – A Partial Synopsis
In this instance, an emergent threat would be where sixty-four per cent of respondents in our P.E.S.T. data suggested currency devaluation was “Somewhat likely or likely” to occur before Q4/21. Furthermore, a plurality greater than fifty per cent stated that inflation and stagflation were possible emerging threats in 2021. Additional emergent threats of note for 2021 was a significant Corporate or Sovereign Credit Event (78%), a GeoPolitical event other than COVID (67.25%), an International Conflict and the possibility of an L-Shaped Recovery (>50%) as opposed to an extended U-Shaped recovery.
We presume COVID has either skewed or pushed these predictions into 2022 and will follow up with our participants in Q1/22 to verify any fundamental changes in their forecasts.