Paying people more may not solve the labor shortage. Here's what companies need to do to attract more workers, according to a Wharton professor.

Paying people more may not solve the labor shortage. Here's what companies need to do to attract more workers, according to a Wharton professor.
Hiring remains a challenge for many businesses during the pandemic.Wilfredo Lee / AP
  • Employers should think more broadly about recruitment to attract staff, said a Wharton professor.
  • Peter Capelli spoke to Knowledge@Wharton podcast about his latest report on the labor market.

Everyone seems to be talking about the state of the labor market.

Businesses across multiple sectors complain that they're been struggling to hire staff for months. At the same time, record numbers of Americans are leaving their jobs — a record 4.4 million quit in September. There are many reasons behind what has been dubbed "the great resignation," and many companies are increasing wages and offering bonuses to retain and attract staff.

But employers should use labor market issues as an opportunity to think more broadly about recruitment, according to Peter Capelli, Wharton professor of management and director of the school's Centre for Human resources.

He spoke on the Knowledge@Wharton podcast about a recent report he co-authored, which looked at how the pandemic has changed employees' attitudes towards work — and how employers should react.

When it comes to recruitment, Capelli said that employers became "picky" about hiring following the Great Recession [in 2008] — where the labor market was great for employers. They started asking for college degrees in requirements for roles that hadn't previously needed them, even though the work itself hadn't changed. He gave the example of a legal secretary.


"Couldn't we think a little more broadly about who you could hire for these jobs? Maybe you should take a look at people that you may have passed over before because you had tons of candidates," Cappelli said.

He said employers are not good at predicting who is going to be a good worker. A degree also doesn't mean that someone is going to be better at a certain role either.

At a broader level, while Capelli's report said employers should expect to pay more for workers, it found that there are other reasons keeping people from looking for work "more aggressively" that employers need to address.

"The first is still fear of COVID. The second is a belief that opportunities are going to get better," said Capelli.

There are things that employers can do to persuade candidates that they're going to be safe, Capelli said. But it's still unclear to what extent people will have some flexibility with being able to work from home.


Capelli said childcare responsibilities were another reason why people weren't returning to the labor market. According to the Centre for American Progress, 51% of Americans lived in a 'childcare desert' in 2018.

"A lot of people have taken on childcare obligations because their job wasn't going to pay enough or the commute was too difficult if they were going back to work," he said.

According to Capelli, some employers still haven't figured out how remote working will help them as a business, rather than just being something they offer staff. Too many are waiting to see what other employers are doing before acting themselves, he said.

Overall, while there will be some employers that return to how they operated pre-pandemic, Capelli said there will be a "critical mass" of employers who will do things differently.

"I think there's an opportunity here for employers to do things that might make their employees happy, might make them stay with you longer, and might be better for the organization," he said. "There's a window for doing something about it that'll probably go on for a little while."