The labor market in the United States is undergoing a revolution, and grocery stores, restaurants, and fuel retailers face challenges like never before to meet staffing needs. How can brick and mortar businesses adapt to this new normal? Understanding the current labor market provides clues to addressing its recent volatility.
What is happening in the U.S. labor market?
The labor market is fraught with difficulties, such as a lack of applicants for front-line positions and rising costs of attracting and retaining good employees. The numbers speak for themselves:
- The U.S. Bureau of Labor Statistics Employment Cost Index (ECI) is the broadest measure of labor costs. On October 29, 2021, the ECI reported that labor costs increased 1.3 % in the previous quarter after rising 0.7 % in April-June. This was the most significant increase in labor costs since 2001, as companies raised pay and benefits during a labor shortage.
- By the end of September 2021, there will be approximately 10.44 million job openings in the United States, up from 6.61 million in September 2020.
- More than 4 million workers quit in August 2021, marking the fifth month in a row of record exits.
- The gig economy grew 33% in 2020 and continues to grow faster than the overall U.S. economy. Approximately 1.1 billion on-demand gig workers worldwide, with 2 million new gig workers starting work in the United States alone in 2020.
- Salaries and wages increased by 1.5 % after rising by 0.9 % in the previous quarter. They increased by 4.2 % year on year. Benefits increased by 0.9 % after increasing by 0.4 % in the April-June quarter.
- According to Joblist's most recent quarterly U.S. Job Market Report, 58% of hospitality workers plan to leave their jobs by the end of 2021. In addition, approximately 25% of former hospitality workers say they will never work in the industry again.
The number of job openings increased to 11.0 million on the last business day of October.
In a year of record quits and increasing job openings, business owners must adapt quickly to meet their staffing needs.
What are the causes of the current labor shortage?
The National Association of Business Economics (NABE) recently conducted a labor survey, and the results were compelling. According to the study, 47% of business respondents were experiencing a labor shortage, up from 37% in Q2. Analysts believe workers are leaving their jobs due to low pay, vaccine and mask mandates, working conditions, and changes to more lucrative and stable careers.
FoodandWine.com cited the many reasons restaurant workers aren't returning. They noted that the job search website Joblist conducted its own poll. In July, they reported that 38% of surveyed restaurant workers said they didn't want to work in an industry that fired them.
And on December 15, CNN Business published new labor-market data. "According to Goldman Sachs researchers, nearly 70% of the 5 million people who left the labor force during the pandemic are older than 55, and many of them aren't looking to return."
Currently, approximately 50% of front-line employees—mainly from Generation Z—want to leave their current jobs, primarily due to burnout, a lack of management, and a lack of peer appreciation. Almost half of front-line employees reported they plan to leave their current jobs, citing boredom, tedious daily work, and low pay. Conditions are deplorable for many retail and restaurant employees.
USChamber.com explains it in detail. Raising wages is only the first step in attracting and retaining employees. What employees truly desire is flexible scheduling and opportunities for professional development and advancement. They also want to quickly find and apply for jobs via text or online channels. Some employers even provide benefits such as tuition reimbursement, generous company discounts, and other perks.
What can companies do to mitigate rising labor costs?
Businesses must find new ways to generate profits, manage spending, and optimize operations to offset rising employee costs. Here are a few strategies:
- Build additional streams of revenue, either by attracting new customers or getting regular customers to buy from you more often. No matter the tactic you use to do that, ensure that it does not require extra work and that you’re earning more than you’re spending. There are digital tools – like GetUpside – that help you do that, by providing the value customers need to choose your businesses while you earn guaranteed profit.
- Focus on reducing turnover. Losing good people and filling those roles can be costly. With these new revenue streams, owners should prioritize developing solid hiring plans that include competitive pay, opportunities for advancement, flexible scheduling, bonus, employee appreciation programs, and other benefits.
- Improve operational transparency. Managers need to see all of an organization's operations in order to identify opportunities to increase profits and reduce unnecessary spending. This includes tracking customer behaviors and purchases carefully and systematically, automating inventory ordering, reviewing vendor agreements, menu, and product engineering to respond to supply chain issues, and more.
In this new competitive landscape, companies are not just competing for customers. They’re competing for employees to help maintain and grow their businesses. In the meantime, paying attention to optimizing operations and creating new revenue streams should be top of mind.