Manpower: Oversupply of qualified workers
Even today, despite labor market stagnation, salaries rise.
If there's one economic axiom that always works, it is the principle of supply and demand, and applies to human resources too. Salaries in the labor market are very strongly affected by the supply to demand relationship, and high-tech salaries are so high compared with other industries because of the direct effect of the severe shortage of workers we experienced a few years ago," says Manpower Israel chairwoman Dalia Narkiss.
Narkiss continued, "Even today, despite the relative stagnation in the labor market, salaries are rising. If an employer is worried that a critical employee will leave, he'll offer a pay hike at his own initiative."
"Globes": This worry of employers will sharpen as we emerge from the crisis. Will we see an upward correction in salaries with the signs of recovery?
Narkiss: "The upward correction in salaries won't happen immediately. Don’t forget that the market is still saturated with the unemployed. Wonderful people with exceptional skills and experience are wandering around the market now, desperately seeking work. This in itself creates downward pressure on salaries. Only when the currently unemployed are hired will the next stage of shortage and intense competition for talent begin. This second stage will be characterized by salary increases."
How long will it take to get there?
"If we look at the last bubble, there were fewer across-the-board salary cuts. When they occurred, they amounted to 5-10%, and it took a year or two from the start of the recovery until salaries corrected. In other words, if the previous crisis ended in mid-2003, only in 2005 did we experience a peak in demand for workers and salaries shot up, sometimes as much as doubling. By the way, this phenomenon wasn’t limited to high tech; it happened in other parts of the labor market, such as in the financial industry. Obviously, these changes in salaries pulled salaries in the entire business sector upwards."
What do you tell workers today? When can they ask for a raise?
"It's very hard to predict when the current crisis will end and when we'll begin to see the subsequent recovery in the labor market. Optimists talk about 2010. I doubt that it will happen next January."
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