The battle for talent and the expansion of the wage gap

Phoebe Johnson

Recent news has shed light on a ‘tug-of-war’ for talent between employers, resulting in salary inflation and widening the pay gap.
As the job market becomes progressively more saturated in the aftermath of covid, companies are having to compete for new employees by offering astronomically inflated salaries to lure and win over job candidates. This however is creating massive and damaging pay gaps that are causing great concern for the future economy of recruitment. So, let’s break this down and discuss exactly why this is happening, what this means, and how we can work to keep recruitment equitable. 

So, why are companies scrambling over talent in the first place?

In the summer of 2021, The Independent reported that ‘More than two-thirds of UK companies trying to hire new workers are struggling to find recruits’ and sadly this statistic is showing no signs of improvement as businesses lick their post pandemic wounds. The issue is twofold, firstly due to lack of talented people in the market and secondly that those looking for jobs are currently experiencing an unprecedented gold mine of a job market, and candidates are so sought after at the moment that businesses are offering larger salaries to attract the right talent for the role and compete against their competitors.
'Gareth Broom, Managing Director of Property and Finance recruiters, GCB Recruitment comments, “It’s a challenging market at the moment. Even when a candidate accepts a role, the time between them accepting and actually starting their new position is a dangerous period. Candidates will undoubtedly receive calls from other recruiters and also the strong possibility that their current employer will pull out all the stops to retain their services.
“If a candidate is good, then they’ll likely receive a counter-offer,” explains Broom. “Due to the difficulty in the recruitment market, companies are desperate to keep good people and know they may find it difficult to replace a current employee.”

Why is this pay gap damaging and who is it damaging for?

This struggle has created a domino effect that could be detrimental not only to how the current employment sector functions as a whole, but the attitudes of valuable, existing members of the workforce. If knowledge of these huge starting salaries (which are not genuinely a reflection of the candidate, but rather a result of a bidding war for talent) leaks into the chitter chatter of the office, a company is at serious risk of losing the faith of its employees. 
It doesn’t end there, for most employers, especially startups and small businesses, it’s becoming almost impossible to compete with this nationwide salary inflation. It may be that as an employer, new talent is required for your business to function, but the current cost of recruiting someone at the moment is simply not financially viable because you cannot compete with the bidding war. This could also have a knock on effect to those who are already employed, and If workload becomes too much, your staff retention could be seriously impacted. 

The Employer

Business owners and employers are no strangers to making tough decisions, especially after the last couple of years. But being made to choose between competing with unviable salary demands or missing out on new talent that could be crucial to the survival or growth of the company, has inevitably created a huge degree of uncertainty and inequity within the job market.

The Candidate

Although at first glance, the disjustice to the candidate may not seem as obvious, the long term impact that the wage gap expansion will have on the not so distant future of employment can potentially be catastrophic in regards to job loss, salary cuts and future job opportunities. If businesses are having to scratch their wallets to compete for talent but do not see a return on investment soon enough, employers will be forced to make decisions in terms of dismissal of staff or redundancies. And unfortunately in many cases, if you’re last-in, you’re often first-out.


Landscape of Recruitment

The landscape of recruitment is still in recovery after the COVID-19 pandemic.  For employers who have already been through enough, especially small businesses and startups, many simply cannot afford to compete with more financially robust businesses who are ramping up unrealistic salaries.
Not only could this be forcing a wedge of distrust between employees and employers, but it is also making it nearly impossible for many entry-level candidates to enter the job market.
Whilst in the eye of the candidate, wage increases are of course going to be more attractive (who wouldn’t like employers competing for you and bumping up salaries ?) The problem is that this level of competition in the recruitment landscape isn't sustainable or viable for anyone involved. The real problem however, lies in the overall knock on effect this has on the existing team members and the salary framework of a company as a whole. In effect, companies that are using these financial incentives to secure new recruits are subsequently causing harm to their own salary structure.
Adriana Herrera, founder and CEO at PayDestiny, a software company that helps companies share salary ranges with employees. Says that it’s not uncommon for a new hire’s compensation to exceed the salary of their Seniors, who have been working for the company for several years, especially if the new hire is taking a position that has been difficult to fill. To add to this, the 2022 Job Seeker Nation Report discovered that most employees don’t think they are paid fairly. In the survey, only 37% of employees felt sure they were paid a fair wage by their employer. With this in mind in the context of Adriana’s reflections, it would not be unreasonable to suspect that employees will be concerned about promotions and financial progression, which of course brings huge damage to employee moral and therefore productivity

Is there any coming back from this?

It goes without saying, but the current salary inflation that the job market is experiencing is a concern. However, there is reason to stay optimistic that if all employers are able to acknowledge this issue and ensure they are not offering huge salaries to lure in potential candidates, then salaries will have the opportunity to return back to a realistic level that will help stabilise the future economy of recruitment and put an end to the spiraling inequality within employees pay checks.



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