By Brent Simmons
Like much of the country, San Diego is releasing a much-needed exhale. After experiencing the longest recession since World War II, the region’s economy appears to be on the road to recovery.
Attendees at HUB International’s 2018 HR Economic Trends Summit learned how bumpy that road has been and what lies ahead. Panel experts presented current trends in San Diego’s economy, employment, and healthcare.
The bumpy but improving road to recovery
The Great Recession took an economic toll. Recovery took six times longer than the average recovery phase. Ray Major, San Diego’s Regional Planning Agency’s (SANDAG) chief economist, described the recession’s impact on the San Diego economy.
- Among San Diego’s three largest employment sectors, Tourism took the greatest hit
- The other two sectors, Military and Innovation (e.g., science, biotech, pharmaceuticals), were relatively unaffected by the recession
- Traditional sectors like Retail, Manufacturing, and Construction suffered more than any other
The good news is – San Diego employment is on an upswing. In 2017, the fastest growing sectors in terms of jobs were in Education, Health Care, and Leisure and Hospitality. Real Estate and Financial Services saw the greatest growth percentage (5.5% and 3.2%, respectively). However, the Utilities sector underwent the largest decrease in employment, shrinking by 5.6%
Low unemployment creates hiring and retention pothole
Despite high employment, few San Diegans are happy about wages. Employers feel they are paying increasingly high wages, yet the average San Diego wage earner cannot afford a house. Wages are not in a good place, having grown only .25% per year. The stark reality is bottom wage earners are now making less than they did in 2007.
Low unemployment puts upward pressure on wages. San Diego’s 3.3% unemployment rate at the end of 2017 was the lowest in the last 17 years. That shoots holes in the notion that “you’re lucky to even have a job.”
“It’s tougher and tougher to find people,” said Brett Good, senior district president for Robert Half, “The market isn’t as flexible, and retention is hard. Employees are confident they can easily find other opportunities.”
Imagine one out of three employees voluntarily leaving for “better opportunities.” Robert Half’s research shows that is a distinct possibility. Forty-five percent of executives surveyed are concerned about retaining their current staff. The demand for skilled talent makes keeping top talent on board even more challenging.
To entice and keep that talent, employers are pulling out the stops, offering more incentives and perks. Taking a page from technology companies, some employers now provide free meals, gym memberships, and a more casual dress code. What the current San Diego market has shown is today’s compensation practices must be wrapped in flexibility.
Healthcare premium increases outpace wage growth
Healthcare is a major detour in the economic and employment recovery road. Lynette Seid, area chief financial officer for Kaiser Permanente, portrays the industry’s current condition as “blowing up.”
Healthcare costs are increasing faster than wage growth and health systems operating performance is worsening. With nearly half (47%) of health insurance coverage coming from employers, a new direction is critical for San Diego businesses.
“For the first time ever, we saw a Covered California plan with a $6,000 deductible,” Seid commented, “It’s shocking for people. Every employer is asking, how do I lower my insurance premium?”
Employers are exploring several routes for healthcare coverage. Some of the current trends include the following.
- Adoption of High Deductible Health Plans (HDHPs)
- Alternative funding mechanisms, particularly self-funding
- Direct contracting with healthcare providers with performance guarantees
- Narrow (or smaller, preferred) provider networks and Accountable Care Organizations (ACOs)
- Expanded wellbeing programs and offerings (e.g., healthy eating, smoking cessation, exercise programs)
While San Diego’s economy is on the mend, the current employment market, and volatile healthcare industry present considerable challenges. Review your recruiting, compensation, and performance practices. Are they keeping pace with today’s economic and employment reality? Do your current healthcare benefits offer the best value for you and your employees?
A comprehensive evaluation of your company’s current situation can help steer your business in the right direction. If you would like strategies for managing costs while improving your position in the competitive San Diego labor market, download HUB’s ebook, The Employee Benefits Cost Management Challenge: Proven Strategies to Spend Less and Become More Competitive.
HUB International’s HR and employee benefits experts are available to guide you by developing a custom-designed roadmap to success.