Labor Market Analysis Explained
Labor or job market analysis is a core part of workforce intelligence. It provides insights into the demand for and supply of labor. The process involves examining existing labor markets for various job positions and skillsets. Each HR department should complete labor market analysis to inform and refine company workforce strategies and policies.
Labor Market and Workforce Intelligence
In a labor market, employees supply while the employers offer demand. HR should review the labor market at the macroeconomic and microeconomic levels. Macroeconomic gauges deal with labor productivity and unemployment rates, and Microeconomic level reviews examine individual salaries, hours worked, and other benefits.
The labor market has four components described below:
- Labor Force Population - Refers to all individuals available to work in a specified labor market. Labor force population or participation covers everyone offering their skills and services for employment irrespective of the industry.
- Applicant Population – The applicant population refers to individuals applying for specific jobs according to their skills and experience. People looking for IT and graphic design jobs can fall under the same application population.
- Applicant Pools – The applicant pool features individuals interested in applying for a specific position. It can include people who have sent their resumes for the job, and HR considers applicant pools the first step in the recruitment process.
- Selected Individuals – Refers to individuals who emerge from the extensive screening process to get the job positions. Each HR team has a unique screening process depending on the talents and expertise they seek in prospective employees.
Labor market analysis offers a way to leverage workforce intelligence data, including analyzing employment records, surveys, studies, and existing information. Most companies, including SMEs, mega enterprises, and governments, can benefit from labor market analysis. The analysis should yield congruent reports detailing specific metrics and how HR can use them.
What Does Labor Market Analysis Involve?
Each organization has a unique way of analyzing the labor market. The analysis is an extensive process with specific objectives, so the HR's aim will dictate what's necessary. Labor market analysis generally involves the following:
Identifying Labor Markets
Labor market analysis begins with identifying the appropriate labor market for all types of job positions available in the organization. The HR team can use this phase to identify posts with many employees competing for labor and those with little to no competition. Reviewing each market allows HR to determine the best pools to target when seeking skilled talent.
Surveying for Salaries
Human resource teams can survey labor markets to get a clear picture of other organizations' salaries and wages for similar positions. Researching salaries and payment schemes can help HR set competitive incentives for prospective talents. The department can also use survey data about wages and salaries for specific positions to benchmark internal structures.
Identifying Market Trends
The job market has many trends that work for different companies and organizations. Popular labor market trends include ancillary pay and merit pay. Ancillary pay structures give HR absolute discretion to pay the subject upon meeting applicable terms. Merit pay structures involve distributing pay increases based on individual performances at work.
Informing Salary Structures
Companies use labor market analysis is primarily for benchmarking and workforce intelligence. The HR department can use data from surveys and analytics to establish, adjust and recommend salary structures and changes. Each staff position calls for unique analysis and adjustments, and HR can find data for like positions in other organizations.
Liaising with Management
Labor market analysis requires specific workforce needs and objectives. HR teams should consult with management concerning workforce needs, business continuity, skillsets, training programs, and other key aspects to guide the analysis. Involving management streamlines processes such as validating market areas and job matches and identifying competitors.
The Benefits of Labor Market Analysis
The job market analysis is an integral part of the company recruitment process. HR undertakes the activity to identify and attract the most qualified employees for the positions it offers. The analysis also helps the HR department provide competitive compensation packages. Here are more benefits of labor market analysis:
- Benchmarking – Analysis provides data about labor supply and demand, salaries paid for similar positions, and benefits packages. The HR team can use labor market analysis to learn from competitor strategies, structures, and practices.
- Recruitment – Human resource departments primarily use labor market analysis to refine the recruitment process and find the right talents for the job. The goal is to ensure the organization has sufficient skillsets to carry out its activities.
- Wages and Salaries – Labor market analysis helps the HR team establish a cost-effective payment structure. HR can determine wages, salaries, and benefits for each job position to offer a competitive proposition for targeted talents.
- Strategy – Analyzing labor markets provides HR with creative insights to formulate temporary and long-term strategies. The data offers workforce intelligence and is crucial in informing recruitment and remuneration plans.
Workforce Intelligence for HR, Investors, and Strategists
Leveraging labor market surveys and other employment data is challenging for most HR departments. At the Revelio Labs, we absorb and standardize hundreds of millions of employment records and HR databases to offer powerful workforce intelligence. Our labs provide an easy way to instantly access records, surveys, structures, and employment databases.