Change in the working world: what are the top labor market trends in 2023?

• StepStone surveyed a total of 3,000 top decision makers from the USA, the UK, and Germany about the most important labor market trends of 2023
• Keyword: Hybrid and remote work. The next evolutionary phase in terms of working models is dawning
• In addition, there are clear differences in the priorities of top management from country to country

The working world is changing. And this change is accelerating. ChatGPT is on everyone's lips, demonstrating once again the huge impact of technological development. Although there were already record levels of unfilled jobs in 2022, demographic change will lead to labor shortage. The Great Resignation shows the new balance of power in the labor market. So does the importance of measures once discussed under the buzzword “New Work”. In parallel, global megatrends and events are also impacting the world of work. And we were living in a time of massive upheaval and massive transformative dynamics even before the coronavirus pandemic. So, the question arises: Which development will be particularly influential in 2023? What should companies, decision-makers and professionals be prepared for? The dynamics mentioned above make it increasingly difficult to predict trends in the world of work.

Every year, there are numerous analyses and predictions about new trends. They can be quite informative, but it's not easy to keep track of them all. To shed light on this, StepStone has compiled a longlist of the most important trends. Here, we will compare the world's most important markets — the USA, the UK, and Germany. Those who are in charge and make the final decisions were surveyed. A look at the respondents:

• 1,000 senior decision-makers from the USA, the UK, and Germany were surveyed. From Director level to CEO, Managing Director and President
• Almost 60% of respondents were male (62%)
• A quarter of respondents were over 50 years old, just under half (46%) were under 40 years old
• Specific attention was paid to company diversity: around 27% of respondents work in SMEs with less than 100 employees, a solid 20% in large corporations with over 5,000 employees. The rest came from companies of intermediate sizes

Labor Market Trends 2023: What are the top 3?

Let’s start with the most exciting findings: Our participants are most interested in the further evolution of working models. This has been clearly a dominant working world theme in recent years, so the result is not surprising. Simon Sinek recently became clear on top trends: "The only thing that we do know that I think I can confidently say is flexibility is here to stay."

The coronavirus pandemic has turned the world of work almost completely upside down. Now, there are companies that work fully remotely and those that rely entirely on on-site work. The majority of office-based companies operates some kind of hybrid model. Current working models are a result of a complex mixture of cultures, operative needs, preferences and experiences from different legal circumstances during the pandemic and much more. It is therefore not surprising that almost half of the respondents expect new insights and developments on the question of “how do we collaborate best?” For 42% of respondents, the further evaluation and evolution of hybrid & remote work tops the list. We have to keep in mind that all these developments represent a very recent development on a global scale. We are still figuring out what works out best and this will continue this year.

In 2023, we can expect to see work models evolving. The insights of the last few years will flow into new, adapted concepts. Science is only beginning to understand which criteria make hybrid work truly successful. It will definitely be exciting!

2022 has not only shown that the shortage of skilled workers in industrialized countries is turning into a major, overall labor shortage. An unprecedented threat to our prosperity. The aging of the strongest economies progresses, and there are fewer and fewer workers available. The Great Resignation characterized the USA and Great Britain. In Germany, too, there were record levels of unfilled vacancies. Despite the difficult economic conditions, demand on the labor markets is incredibly stable. It is therefore not surprising that people are the focus of the second and third top trends. 34% of respondents named “people first, mental health & well-being,” closely followed by “work engagement & retention” (33%). Apparently, bosses want to take special care of their employees in 2023.

These were closely followed, with 31% each, by “sustainability, going green & ESG,” and “diversity, equity and inclusion”. Corporate responsibility is clearly becoming increasingly important and must not be given mere lip service in 2023. Companies are increasingly focusing on the desires of applicants. After all, as we shift from a shortage of skilled workers to a lack of workers, this is a strong weapon in the battle for talent. In summary, all trends mirror — and further accelerate — the shift in the world of work towards a candidate market. What matters is what employees want and, more importantly, need to be productive.

As a result, employees are becoming more mobile. If they see that a company does not value their ideas, demands, and wishes, they look around for alternatives. This is a trend that was not surveyed, but it is definitely here to stay. After all, loyalty to a company is also dwindling. Decades-long careers in the same company are now a thing of the past. This presents companies with enormous challenges in terms of leadership and corporate culture. Because even if no one can predict the future exactly, one thing is certain: The demands on the flexibility of companies will increase. And flexibility means much more than mobile working. People strategies must become flexible.

What regional differences are there in the top labor market trends 2023?

Regional focuses are at least as interesting. Not every market ticks the same. Different economic and social conditions lead to different priorities. But does this mean that the labor markets and work environments in the USA, the UK, and Germany are moving in step or apart?

In the USA, the focus of decision-makers is clear: work engagement and retention. This is not surprising in view of the great resignation that has already been mentioned. In the future, corporate success will depend more than ever on keeping solid employees in the company. However, the issue of work engagement also raises the chicken-and-egg question. The U.S. already performs much better than Europe in this area, with a much higher level of employee engagement. However, the topic also ranks high in the UK and Germany. This demonstrates the tension in the labor market from the employer's point of view.

In the UK, “people first, mental health & well-being” and “diversity, equity and inclusion” rank second and third. So, "people focus" plays an even greater role for UK companies than in the USA and Germany. Here, too, the priorities of the previous year continue. After all, the UK made a name for itself with a large-scale experiment on the 4-day week. More than 70 companies took part. In Germany, on the other hand, the topic performed weakly. This confirms results from previous years that indicate that there is a need to catch up. This provides companies with a great opportunity to play a targeted role in the spotlight.

What plays a particularly central role in Germany, on the other hand, are the shortage of skilled workers and the threat of labor shortage in general. This is because, despite record employment in Germany, more vacancies were unfilled in 2022 than ever before. It has never been more difficult for companies to find staff. As a result, 83% of companies are feeling the effects. However, it is interesting to note that the issue is significantly higher on the agenda in Germany. This is because the ratio of vacancies to job seekers is significantly more critical in the USA and UK from the companies' point of view. Perhaps one reason is that the global effect of labor shortage will hit harder in Germany than in the USA and the UK.

Conclusion and summary

Tight labor markets will shape the future. This does not need to be bad news for companies. In fact, companies have an opportunity right now to redefine their own role as actors driving change towards a people-centric, fairer (US, UK) and more sustainable (DE, UK) world of work. In this, despite the huge challenges, lies a great opportunity for the future of work. In times of an ever-decreasing workforce, companies that take the right approach could secure the number one competitive advantage: people. The priorities of their top decision-makers show what they will value in 2023. In this way, a huge challenge of the present becomes a great opportunity for the future. For companies, for employees, and for society.