All over the country, help is being sought to plaster shop windows with signs; early closure of the business due to lack of employees; and there is a longer wait for many services.
COVID-19 has kicked off a tsunami of job woes, starting with the Great Quits in 2021, which, according to Pew Research, saw a record number of people quit their jobs. The labor shortage has not abated, and Abilene is not immune.
As COVID-19 opened the floodgates, a slow trickle began long before the closures.
The nation’s labor force participation rate peaked in the spring of 2000, when it reached 67.3 percent. It has steadily declined since then. At the end of 2013 it was around 62%. In subsequent years it fluctuated between 62.1% and 62.9%. It had just passed 63% in February 2020 when the pandemic hit and plunged to 60.2% in April, a number not seen since the 1970s.
As COVID-19 mitigation restrictions were lifted, workforce participation began a slow increase and returned to 62% and above. In January it was 62.4%. The labor force participation rate is defined by the Current Population Survey as “the number of people in the labor force as a percentage of the civilian non-institutional population […] the participation rate is the percentage of the population that is actively working or looking for work”.
If the labor force participation rate is similar to pre-pandemic numbers, it begs the question: “Where are the workers? Why does there seem to be a labor shortage?
A common refrain among entrepreneurs and politicians is “nobody wants to work anymore”. But the issue is more complex than that.
“I think COVID has changed a lot of people,” said Kent Campbell, executive director of the Dickinson County Economic Development Corporation. “People were a little different when it came to overtime and some of that stuff. They want to spend more time with family.”
It may not be that people don’t want to work, rather the pandemic has helped shift their priorities. Another factor is nationwide employment growth. In January alone, more than half a million new jobs were added to the American landscape as unemployment hit a 54-year low.
The United States Chamber of Commerce coined the term “The Great Reshuffle” in its examination of the labor shortage.
Jobs that require in-person presence, such as foodservice and retail, and have the lowest wages, have had the highest firing rates. The chamber reported that the leisure and hospitality sector has a churn rate of over 5.2% and the retail sector is around 4%, both exceeding the national average of 2.7%.
However, “hiring rates have surpassed termination rates since November 2020,” the House said in a Jan. 19 update by Stephanie Ferguson, the House’s director of Global Employment Policy and Special Initiatives. “So, many workers are leaving their jobs, but many are being rehired elsewhere,” said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University.
Hill recently gave an overview of the Kansas economy in Abilene, which included a discussion of labor issues. He took the shuffle theory a step further and looked at the last decade, when people had trouble finding work in industries in which they were educated or skilled.
Companies were looking for more candidates for an opening and wanted those who were overqualified, she said.
“We had all these people with some college or high school and they got into food service and retail because other employers weren’t hiring them and (the food service and retail industries were growing,” he said .
Many of these employees also held multiple jobs.
During and after the big 2021 layoffs, companies in other industries started to expand, which opened the door for new employees.
“They then moved on to these full-time jobs with benefits,” said Hill, who also had a sombre remark about the Kansas restaurant industry. “(Restaurants are) still all half empty today because they don’t have enough staff. Prices keep going up. Quality is going down… Guess what’s going to happen? I think as an industry that is going to shrink. Today we have too much retail, too many food services for the economy.”
He predicts that the only way for the industry to survive is for some places to close. When that happens, those that are still open will pull employees from the places they’re closing, and demand will shift.
“They’ll be able to actually hire someone who could do (the job) more efficiently and you can improve the quality,” he said. “Unfortunately, that’s urban, that’s rural. Everywhere I go you can see that even in Kansas City…they don’t fill up all the space every night and there is poor quality and the prices have gone up. They will have to shrink.
Another sector struggling with turnover is manufacturing. Allison Blake, Land Pride’s corporate recruiter, said the company hired 220 people last year. Entry level positions are easier to take and she knows they are taking from the food service and retail industry.
The 220 hires represent a mix of skilled and unskilled positions, mainly manufacturing jobs, welders, painters, assemblers, forklift operators, he said.
Filling the open positions is a struggle because other manufacturers in the region have also expanded operations leaving them all competing for skilled workers.
“We are like everyone else,” he said. “It seems there are too many jobs, not enough people. Companies have grown… but the population has not grown”.
They will train new employees and have a welding school, which they attend about six people every nine weeks.
“Entry-level positions are easier to fill because we have on-site training so we can hire someone with no experience and put them into a production role as a new employee and have them learn on the job,” he said. “Some of the more skilled positions are more difficult to fill.”
“We don’t have an employment problem,” Hill said. “We have a salary problem. When you’re in full employment, the only way to get the next employee, in an aggregate economy, is for wages to go up.
Kansas is one of 20 states that has not instituted a minimum wage higher than the federally required $7.25.
The first federal minimum wage was part of the National Industrial Recovery Act of 1933, signed into law by President Franklin D. Roosevelt. The Supreme Court later found the act unconstitutional. In 1938, the Fair Labor Standards Act set it at 25 cents an hour. The federal minimum wage was enacted to combat the rise of pimps in the late 1800s and early 1900s.
Low-wage jobs, such as those in food service and retail, have the highest turnover rates, according to several sources including Indeed.
“Wages are hard,” Campbell said. “I think people should have a livable wage, but where does that come from? It’s easy to say ‘that company should pay more or that company should pay more’, but what are the costs?”
Higher wages and decent benefits help attract and retain employees, which in turn saves companies the costs associated with retraining. Blake said Land Pride has had a “significant” uptick in the past two years.
“When I started in October 2020, our starting wage was $15 an hour as of January 1. This year it’s $18.25 an hour and up,” she said.
In Dickinson County, wages have increased by about $5,500 since 2016, and much of that increase occurred between 2019 and 2020, when median household income grew from $49,991 to $53,864, a 7.75 percent increase. %, according to US Data. Nationwide from 2016 to 2021 wages rose and fell at a steady pace but remained relatively unchanged, as noted by the Federal Reserve Bank of Atlanta. In May 2021 they started to climb. However, adjusted for inflation, wages have declined by 2.2% since the start of 2021, but as inflation continues its downward trend, real wages will rise again.
Inflation and an uncertain economy also affect how companies compensate their employees, Hill said.
“The (employees) say you have to give me a raise because I can’t pay the rent,” she said. “(The rent) is going up, the cars are going up. The company says: ‘Today I don’t understand this market’”.
With procurement costs rising and uncertainty about when they will fall again, companies must balance providing a wage that meets today’s needs with concerns about what will happen when prices fall again. All the while profits are skyrocketing.
“You can look at world gas prices that have gone up, but those oil and gas companies have had the best profit margins ever,” Hill said. “Many companies made the best profit margins because they were raising prices more than wages. (In Kansas) we got to June and businesses started freaking out. “I don’t want to raise wages any further because I don’t want to get stuck in this very high wage and my price isn’t going up at the same time.” So, we’ve had this kind of outcome of raising wages, so they’ve benefited from the excess profits.”
Looking ahead, Hill said he was optimistic about the economy and the direction jobs are headed as an engine of economic growth. According to a recent Forbes article, an economy that can provide a high level of employment is healthy.