Why thinking like an economist can provide an edge for HR teams

It’s unusual for the Governor of the Reserve Bank of Australia to be as much in the spotlight as we’ve seen in recent months. 

And while the cash rate announcements and their subsequent effects on interest rates is the key driver for many, for HR and people leaders, deeper awareness of monetary policy (as well as economic policies more broadly) can undoubtedly make us better business advisors. 

There are three specific areas of focus for HR teams in which a more detailed understanding of economics can make a difference to the approach and effectiveness of an HR team. 

1. The forward HR agenda

A recent survey of more than 800 HR leaders by research and consulting firm Gartner identified that economic pressures, global supply constraints and scarce (therefore expensive) talent all contributed to their top five priorities for 2023.  

Learning to think like an economist can empower HR leaders with a broader perspective that assists in both decision making and effective use of resources against what can seem like an almost limitless number of possibilities.

2. Competition for talent and wage pressures

Over 50 per cent of the participants in the Gartner study said that they expect the competition for talent to increase significantly in the next six months, regardless of broader macroeconomic conditions. 

Most Australian HR practitioners will understand and monitor the unemployment rate (which has been historically low in Australia over the last eighteen months or so). However, there are a range of other economic indicators that can help HR teams to form their own more nuanced view. The NAIRU (non-accelerating inflation rate of unemployment), the underemployment rate, the job mobility rate and vacancy rate all available through ABS sources. 

3. Disruption, change and the Future of Work

More than 40 per cent of the HR leaders in the Gartner study said they didn’t have a Future of Work strategy that was equipped to combat the current disruptive landscape which include shifts in skills, scarce talent, high turnover, globalisation and a shift in the employee-employer dynamic. 

Accessing the myriad of lead and lag indicators used by economists can help with building a robust Future of Work strategy. While data modelling has its limitations, decision making through data insights is always preferable to that unreliable crystal ball! 

Further, Gartner points out that “digital transformations, economic uncertainty and political tensions have led to much disruption and change – which in turn has led to change fatigue and resistance”.

Economic thinking emphasises the importance of adaptability in response to changing circumstances.  Economic models and tools like scenario analysis and sensitivity testing can guide HR in building contingency plans, managing workforce transitions and maintaining operational continuity when we experience economic shocks like the pandemic or inflationary pressures caused by the war in Ukraine, for example.

Skilling up in economic fundamentals is useful for your business leaders too

While there’s a strong argument for HR leaders and teams to upskill their own economic understanding, the same principles apply more broadly across your workforce too. 

While many business leaders will have completed at least some study in economic theory, building a foundational understanding of economics across a whole workforce can reinforce the ability of a business to anticipate, navigate and respond to inevitable economic and political shifts.

An easy way to upskill your team and leaders in foundational economics and the practical application of them, is to undertake CEDA – the Committee for Economic of Development – Economics for Non-Economists short course.  

It’s an online course that introduces economic thinking, tools and principles. Written and delivered by CEDA’s leading economists, it aims to provide the knowledge and understanding to engage with economics as it applies within your field. 

Upskill your entire team to learn the language of economics. Talk to us today about bulk enrolment pricing offers. CEDA members receive additional discounts. 

Download the full course overview or contact CEDA’s Education Lead, Danielle Jones on 0405 429 355.