I hope that at the conclusion of today’s blog post, you have come to recognize why in today’s economy, it’s so difficult to hire people for entry level jobs. There is certainly a lot of confusion about the causes of this worker supply-and-demand crisis, and you may disagree with my own take on the situation. You may even be able to provide some evidence to support your own view. I’d be the first to concede that there are a lot of articles about the current workforce shortages that support many different perspectives. I believe, however, that my frontline experience with the job market gives me a special insight into the source of the problem. Today’s predicament for employers seeking to beef up their staffs can be summed up in one sentence: There are millions of open jobs, mostly in retail, restaurants, and entry level positions, that remain unfilled. I am personally feeling the impact of this problem in the many franchises I own. What’s interesting—and more than a little distressing and frustrating—is the fact that there are more than enough unemployed people “out there” who could fill these open positions.
Unfortunately, the applications simply aren’t rolling in the way they did during pre-pandemic times. If I’d posted an open sales associate position in my Jersey City store before March 2020, for example, I would typically get swamped with 50–100 responses in the first week, forcing me to close down the post. Why? Because at that point, the pool of candidates would provide more than enough talented prospects to choose from, and I simply didn’t need to wait for more résumés to drift in. A starting wage (in 2018/2019) was $12–$13/hr, and the position guaranteed both incremental increases for completing training and also bonuses for achieving certain sales benchmarks. In my stores in Bergen County, I would typically get 10–20 applications at each location in about a week’s time.
This is no longer the case. I posted a job in Jersey City about 3 weeks ago, and I advertised that job not just through Hyrell, which posts on Indeed/Monster and a few other online sites, but also on LinkedIn. I also placed an ad for the Bergen County stores around the same time. I have gotten fewer than 10 responses total. Also, let me note that our starting wage is now $15, a minimum increase of 16 percent since 2018/2019, well above both the inflation rate and the various price indices for that period. Furthermore, new hires can get a salary increase of $1/hr for completing a basic training module within 30 days of their start date. The bonus plan has also become much more attractive: We now offer a $250 referral bonus for team members who successfully bring on board a new hire. Unfortunately, when I posted jobs with these incentives 3 months ago, I was getting fewer than 5 applications a month.
Let’s look at one of the big e-tailers on the scene that is struggling to hire workers. Amazon is growing at lightning pace, and it initially went from paying $12/hr in its warehouses to $15/hr. Today, it is offering as much as $20/hr in some markets in order to fill vacant positions and alleviate its manpower shortages. The company is also offering employees sign-on bonuses, and all they have to do is commit to remain an Amazon employee for a set period of time, which isn’t actually that long a period, and could be as little as a year. Amazon’s woes have benefitted my own businesses. I have hired some of that company’s employees, who quickly burnt out or did not like the warehouse work culture. I take pride in the workplace environment that exists within my own stores. I do not think of them as beehives and my workers as drones. As I wrote in last week’s blog post, my motto is “People Before Profits.” We all have lives outside the walls of the stores; we address real-life (and sometimes near-death) issues. (See my link at the end of this blog post, which takes you to a GoFundMe campaign for one of my valued—and very ill—employees.) The fact that my pre-pandemic turnover rate remained exceptionally low is a sure sign that I have been successful in fostering a culture that produces happy—and loyal–employees.
Pulled right from Google:
While the average employee turnover for all U.S. industries is around 19 percent, the average turnover rate in the retail industry is just above 60 percent, according to the National Retail Federation.
In my stores, the turnover rate in 2018–2019 was under 20 percent. In 2020, that rate jumped to nearly 80 percent. That number looks distressingly high, but it’s actually a bit deceptive. It’s not as if 80 percent of my permanent staff had done its best Elvis Presley impression and “left the building”; instead, the same positions opened multiple times. Six months into 2021, I’m looking at a turnover rate of nearly 50 percent in just six months. (I see the same metric at work in both 2020 and 2021. I’m not losing half of my dedicated staff; it’s simply that the same positions opened up multiple times.) I am not an economist. I am not an unemployment guru. However, it would be hard not to connect Washington’s bonus unemployment money with the reluctance of people to return to jobs that pay about the same as their out-of-work benefits. In fact, many people called me for jobs in January when they thought either that the unemployment program was going to end or that the bonus money was going away. When the program was extended, these same people decided to remain jobless until the bonus money runs out.
When Congress and the president instituted the bonus program, I believed it was the right thing to do. Huge segments of the country were out of work—and not by choice. People who lived paycheck to paycheck were having to make tough decisions: Do I feed the family? Pay rent? Put gas in the car? Facing this kind of challenge presents you with what might call a no-win scenario. (You might not believe it, but in 2014, I was on the verge of bankruptcy myself, and yet even then, I never once worried about whether or not I would be able to eat or maintain a roof over my head. I cannot imagine the emotional stress that such tough decisions can cause.) Fast forward three months after the start of the government’s response to the pandemic. The Paycheck Protection Program (PPP) and many other grants were working. Many people were returning to work…maybe not at full pay, but they were bringing home enough to live on and get by. When the PPP was extended again through the summer of 2021, the program caused workers who had contemplated reentering the job market to refrain. (Did PPP overcompensate? Maybe it provided too much incentive to remain out of the workforce. But maybe inflation was better than depression. I’m not qualified to criticize the decision to extend the program.) The bottom line: People didn’t want to return to work. What does this situation say about us? Are we burnt out as a country? Are we sick of working basic jobs that barely pay the bills—and are unfulfilling to boot? Do we just want to coast a little longer until we’re forced to reenter the workforce? Should the goal be to bring about a change in expectations, establishing a new baseline for employment levels and wage standards?
While I don’t have exact stats, I remember reading a few articles recently suggesting that working class jobs in the 1940s and 1950s (the immediate post-WWII era) paid the equivalent of $70k–$80k/yr in today’s dollars. Those same jobs now pay in the range of $40 to $50k/yr. Meanwhile, rents are higher, and cars and basic necessities cost more. In short, the people in the middle are making substantially less than in earlier times even as their expenses have risen. It’s probably one of the motivating factors for starting your side hustle or business. Right now in New Jersey (early July 2021), if you are unemployed, you can collect about $500/week in unemployment plus an additional $300 in bonus federal money. These numbers translate to a salary of $40k/year if you qualify! As my mother would say, “That’s a lot of money to stay home and eat bonbons!”
Unfortunately, what this situation means to me and to many other small business owners (and even many larger corporations) is that we are having trouble hiring people and retaining those people we already have. What can we do to counteract this staffing shortage and overcome the challenges it presents? I have been relying heavily on referrals from existing staff for potential candidates. These candidates tend to be more loyal (not always, but usually), and they feel a stronger connection to the workplace because they don’t want to make their friends look bad for referring them. I have also increased my starting wage and offered referral bonuses for help in the hiring process. I imagine other companies have found other methods that have worked for them, and I encourage you to share those strategies on the LinkedIn post or as a comment on this blog post. The federal bonus will end soon, and many people will need to return to the workforce again if they are to survive. I hope that most start looking before the money runs out so 1) they have more choices about where to work, and 2) they don’t experience an income gap that leaves them payless for any length of time. No crystal ball is needed to see what is going to happen. We’re less than 90 days away from knowing how the situation plays out, although we will have to wait and see if the impact of the federal programs leads to changes in worker mentality over the long haul.
I have an ask for you.
As I wrote last week and as I alluded to earlier in this week’s blog post, one of my team members suffered a massive stroke on Saturday, June 19. She has been with Musically Yours for 18 years (10 years before I became a partner). Her
family has started a GoFundMe campaign to raise money for her recovery. She is a kind- hearted and positive person, whose smile is more contagious than COVID’s Delta variant…but never fatal. My partner Eddie and I have contributed on behalf of the store, and we also continue to work with her family, but we know she will need a tremendous amount of physical and speech therapy over the course of the next year. Please consider contributing to the GoFundMe. Please be generous. Thank you.