Written by Breanna Hardy
Hiring surges and increased automation are changing the way industries bring back employees. But the need for labor has put job candidates in the driver’s seat, and wages are rising despite $15 minimum wage not yet being mandated.
The Raise the Wage Act of 2021, introduced in the U.S. Congress in January, would gradually increase the federal minimum wage from $7.25 to $15 by 2025. Though it has not yet been signed into law, businesses have already had to raise wages to compete for employees.
Lauren Milam, regional vice president at Hire Up Staffing, said that staffing agencies are in demand because companies are hiring, but they’re not filling roles quickly because candidates desire higher pay than they were getting before the pandemic.
“Companies are wanting to pay kind of what they were wanting to pay before,” Milam said.
But candidates are able to be picky right now because they are in the driver’s seat, she said.
“We’ve been recommending to companies to raise their pay rates,” Milam said.
Those who don’t raise their pay rates to at least $15 are at risk of seeing employees flee to other companies who offer more money, regardless of it being regulated. It is a supply and demand issue – when there is a high demand and low supply, it costs more, Milam said.
Some businesses are starting to raise pay rates, and others are hesitant. Successful clients raise pay rates and are more open to translatable skills.
Milam advises her clients to pay attention to qualities and characteristics of a good employee rather than what’s on the resume, if companies are willing to train new employees well.
“They either need to raise their pay or they need to lower the expectations on the exact skills they need,” she said. “Something has to give.”
If nothing gives, then employers will face production loss.
In 2017, the Institute for Research on Labor and Employment at UC Berkeley studied the effects of a $15 minimum wage by 2023 in Fresno County. Its effects on businesses, the study estimates, would reduce employee turnover and increase automation and employee productivity. The wage increase would have the greatest effect on low-wage workers, it stated.
Seattle has been operating with a $15 minimum wage since 2017. In a University of Washington-led study on Seattle’s Minimum Wage Ordinance, business owners stated they reacted by raising prices, reducing the number of employees or their hours, or reducing business hours.
Antonio Avalos, professor and chair of the economics department at Fresno State, said that some small-business owners need to raise the minimum wage to attract more productive workers.
“This is a productivity argument,” Avalos said.
If small businesses value higher education and experience, then raising wages will attract the talent.
“When the minimum wage goes up, it’s going to produce this bumping-out effect,” Avalos said. “It’s not just the very low pay workers that are going to receive an increase. They are going to bump up the next level, and that level is going to bump up the next level.”
Automation could absorb the cost of labor, but not for all industries.
Bobby Kahn, CEO of the Madera Economic Development Corporation, says automation is already a trend in the food service industry. Some fast food restaurants are making an effort to do away with counter-service employees, replacing them with kiosks.
It’s directly in response to being able to hire fewer people and reduce labor costs, he says.
“Technology can both destroy and create jobs,” Avalos said.
Automation might take out a few simple jobs, but then it requires a skilled employee to service these machines.
“The technology that we have seen so far is the type of technology that through automation can displace workers of low skills, but can also increase the demand for workers with higher level of skills,” Avalos said.
Automation has affected restaurants, retail, and agriculture, but leaves hospitality and construction industries relatively untouched so far. Labor-intensive industries and those industries that cannot automate easily will take higher wages the hardest.
“There’s just an ongoing competition that will always keep the small business person at a disadvantage,” Kahn said.
While some small businesses might not be able to match the proportional raises by some other box stores, Avalos said small businesses offer job security and personal connection in the community – facets corporations don’t always have.
Not every industry is choosing to hire fewer employees. The trucking industry is facing a hiring surge, but a shortage of employees is not meeting the demand.
Kahn said it’s being exacerbated by an aging workforce. The average age for a trucker is 61.
“There’s not a pipeline full of younger demographics that’s looking to get into that field of work,” Kahn said.
Companies are seeking younger demographics, but they will eventually compete for employees by paying more.
Milam echoed that manufacturing, industrial and distribution centers are facing a hiring surge. These industries are seeing a surge ever since the pandemic hit because of increased online ordering and food going out of stock.
But there’s a shortage in the candidates for hiring.
Milam’s best guess for the lack of candidates is that unemployment checks, stimulus checks and tax returns are giving people extra cash and a safety net for the time being.
“People were making more money staying on that,” Milam said.
Anyone with experience will have a relatively easy time finding a job in the manufacturing and industrial sectors, she said.
It’s unclear how fast and sustainable economic recovery will be, which makes small businesses hesitant to invest in new equipment, workers and supplies. How business hire their employees back will depend on their confidence in the market.
“It’s going to depend on the strength and the sustainability of the recovery,” Avalos said.
While the Paycheck Protection Program did help many small businesses pay overhead costs and payroll, Avalos said that uncertainty is the major force driving hiring decisions.
“Right now we call it a candidate market,” Milam said. “They are definitely the ones that are more in control.”