With so much talk about the labor shortage across the nation, from truckers to fast food workers, the job situation across the nation is topsy-turvy at best. For a myriad of reasons relating to the pandemic and worker’s rights, many businesses across the nation have found themselves short handed and clamoring for workers just to keep their doors open. This has caused employers undue stress, the need for copious amounts of creativity, and ultimately the necessity to shell out more money in terms of wages. In the last 3 months, wages have grown more than they have in the last twenty years, and although many workers are happy with this increase, many small businesses are feeling the pinch of paying more for labor.
Wages Increase Across the Nation
Recently the Bureau of Labor Statistics explained that workers’ pay had jumped 1.5 percent for the last quarter ending in September, with benefits cost rising .4 percent. The higher wages were led by retail employees who saw an increase of 5.9 percent, as well as hotel, restaurant, and bar employees at 8.1 percent. These numbers reflect the businesses that were hard hit during the pandemic lockdown, and certainly illuminate the tattered hospitality industry as they struggle to get back on their feet after the chaos of the pandemic.
There are many reasons why wages are rising, and the most important reason has to do with the law of supply and demand. There simply are not enough workers for all of the jobs that need to be filled. And because of this, the workers who are in the picture are getting paid a premium, With a revived interest in getting back to “regular life” after the lockdown and uncertainty of the pandemic, many Americans are getting back to their normal shopping, dining out, and coffee-drinking habits. Add to this the positives brought about by the Covid-19 vaccine, and even businesses like Starbucks and McDonald’s are hurting for workers and raising their wages to staff their restaurants.
Money is not the only perk for workers in this post-lockdown world, however. According to the AP Newswire, for the first time in two decades, the workers themselves are on top of the food chain as it comes to the job market. Along with higher wages, workers are receiving more benefits and other creative perks such as flexible work hours and hiring bonuses.
For many workers who have been working blue collar and hospitality jobs, the pay increase is by design. This positive increase in wages for disadvantaged workers “is the result of specific policy choices to give workers a better bargaining hand and to ensure the economy recovered faster,” said Mike Konsczal, a director at the Roosevelt Institute. “The fact that it’s happening is pretty unique.” If these hourly workers can experience a salary increase, they will continue to spur the economy in a positive direction.
Good News Tempered by Inflation
More money in workers’ paychecks sounds fantastic, but will Americans really be experiencing more money in their monthly budgets? Jason Furman, a former top economic adviser to President Barack Obama, asserted that when adjusted for inflation, wages are still trailing the pre-pandemic level, especially considering the price spike of big ticket items like furniture, airline tickets, and used cars. And with all the troubles experienced by the supply chain and lack of key people in key roles, the cost of products will continue to increase.
Although individual employees may be happier with a bigger paycheck, where is all of this increased compensation going to come from? It stands to reason that the consumers will be bearing the burden of the increased compensation for workers. And it is already happening, with rising costs in the grocery aisles, the used car lots, and the electronics departments of big box stores.
According to Bloomberg, “Some companies — like Chipotle Mexican Grill Inc. and Tesla Inc. — have raised prices to help offset increased labor costs, fueling concerns the rapid wage increases could lead to a wage-driven inflationary spiral.” Other experts contend that this would only happen if wages continued their rapid rate year after year. And if businesses are able to raise productivity along with wages, this will help to absorb the costs.
“Companies looking at their budgets realize that [raises] are probably not going to meet inflation,” said John Dooney, a human resources manager with the Society for Human Resources Management. “But what we see is more strategies around really rewarding high performers.”
The situation is bound to get worse before it gets better. It will take a while for the money lost by companies via the increased wages to catch up to the cost of products. International Business Machines Corp. CFO James Kavanaugh,“With a competitive labor market, this is putting some pressure on our labor cost, including higher acquisition and retention costs, which is not yet reflected in our current pricing. We expect to capture this value in future engagements, but it will take time to appear in our margin profile.”
One important key to the problem is that many companies have been affected by the slow downs in the supply chain. And as the old saying goes, time is money. The longer things take to get where they are going, the more they will cost in the long run to get there. Companies are paying for elements of the shipping process they have never had to before, including renting space at ports while they wait for truckers. Sherwin-Williams Co. CEO John G. Morikis said, “We have had to make some wage rate adjustments in some of our factories, distribution centers and fleet drivers to I’d say attract and retain some of our employees.”
The highest wage increase in 20 years is certainly cause to celebrate, but the celebration is a bit tempered while the country waits to see how the inflation situation will play out, and how much consumers will need to pay for goods and services. With the supply chain in a tattered mess, consumers are paying the extra costs to get materials from point A to point B, and this will also affect the wages and profit margins for businesses across the country. The holiday season will certainly prove interesting this year as employers decide how to keep their businesses afloat in a tumultuous sea.