US companies face staff shortages despite wage increases
Some of America’s biggest companies are struggling to recruit enough staff to keep up with rising consumer demand, despite rising wages to levels that prompt them to raise prices to protect their profit margins.
Earnings announcements this week explained the difficulty employers from e-commerce warehouses to fast food restaurants find recruiting and retaining workers as increased consumer spending collides with a historically tight labor market.
Starbucks has spoken of “rapid” increases in its wage costs, McDonald’s has described a “very difficult staffing environment” and Amazon has predicted that “workforce inflation” will add $ 2 billion to its base costs in the fourth quarter.
“For the foreseeable future, our capacity constraint is actually the workforce, which is new and not welcome,” Amazon CFO Brian Olsavsky said, adding that the shortages were affecting its productivity and operations. service levels.
“The problem is everyone is rushing to fill the positions” now that the economy has opened up, said Carol Tomé, general manager of UPS. “That’s why you see so much pressure out there.”
Waste Management, the garbage collection and recycling group, said core inflation in its wage costs hit 8.7% in the third quarter. John Morris, its chief operating officer, attributed the “sharp” staff turnover he witnessed to a phenomenon economists have dubbed the great resignation, in which millions of workers quit their jobs and rethink their jobs. career.
IBM companies at Sherwin-Williams, the paint maker, said they adjusted wages not only to attract new employees, but also to retain existing employees. However, retention is becoming “increasingly difficult,” said Cynthia Sanborn, chief operating officer of Norfolk Southern, who said the rail operator has seen attrition accelerate in the past two quarters.
Comments from some of the nation’s largest employers precede next Friday’s jobs report, which investors are watching closely after last month’s wage data showed the U.S. economy only created 194 000 jobs in September, well below forecasts.
Employers are responding by offering higher wages, with US Department of Labor figures released on Friday showing wages and benefits growing at their fastest pace since 2001. The cost of employment index rose 1 , 3 percent between the second and third trimesters.
Costco, which had already raised its minimum wage to $ 16 an hour in February, raised it again to $ 17 an hour this week, while Starbucks delayed wage increases from January onwards. which would mean that its US hourly workers earn on average nearly $ 17 an hour. by next summer.
McDonald’s said its franchisees were experiencing wage inflation of more than 10%, but some had yet to cut back hours of operation late at night due to understaffing. Restaurant Brands International, owner of Burger King, said labor issues had forced some restaurants to close their dining rooms.
“I think the environment is going to continue to be tough over the next few quarters,” predicted McDonald’s CEO Chris Kempczinski.
McDonald’s was among companies such as Kimberly-Clark, the Kleenex toilet tissue maker, who said they passed the increased costs on to customers by raising prices. The burger chain expects its menu prices in the United States to increase by about 6% this year from 2020, which will contribute to higher profit margins.
These increases, coupled with strong consumer demand, contributed to strong earnings growth. Third-quarter profits for members of the S&P 500 are 36.6% higher than a year ago, according to FactSet, putting U.S. companies on track for their third quarterly year-on-year growth since 2010.
However, labor shortages compound other challenges, including commodity inflation from steel to resin and costly disruptions to shipping, trucking and other links in the chain. supply.
“In terms of the issues, it’s a bit like Whac-a-Mole: things are popping up,” Coca-Cola CEO James Quincey said of freight bottlenecks and the market crisis. of work, which affects the bars and restaurants where his soda is sold. .
Some employers are concerned that the Biden administration’s pending vaccine or test mandate for large employers will exacerbate their workforce issues. The National Retail Federation warned this week that such mandates “unfairly push American employers, including retailers gearing up for the busy holiday season, amid a controversial and politicized debate.”
Others said their staff shortage prompted them to speed up the automation of some roles. “We are working to automate a number of roles where we see long-term challenges in attracting and retaining employees,” said Morris of Waste Management, describing the move as “a mechanism for reducing risks in the labor market. ‘today where some jobs just don’t attract the interest they did before.