Business

US retailers compete to entice workers in face of labour shortage

In more than 30 years in the retail business, said Ken Giddon, “I have never seen anything like this before.”

Rothmans, the men’s clothing business he runs with his brother, not only survived the pandemic but is expanding from three New York outlets to four. Having found a competitive deal on a new location, everything is set for the opening, except that Giddon cannot find the 10 people he needs to staff the new shop. Two prospective employees promised to join, only to drop out. 

Giddon’s challenge is one being felt by employers in industries from nursing homes to trucking companies, after 18 months in which health fears, childcare shortages and enhanced unemployment benefits kept millions of Americans out of the workforce. 

But the shortage of people willing to work in stores and warehouses is particularly acute. The number of unfilled retail jobs spiked from about 750,000 before Covid hit the country to 1.1m this July, leaving employers racing to staff up for the holiday season, the critical few months in which most chains make a disproportionate share of their annual sales.

While Giddon is having difficulty finding just 10 employees, Dick’s Sporting Goods is looking for 10,000 to meet the demand it expects between now and Christmas. Kroger and Michael’s are each seeking 20,000 seasonal workers while Amazon, with which traditional retailers compete for both customers and employees, is in the market for 125,000. 

“There are not enough workers in the supply chain so this will impact everything from availability in stores to being unable to fulfil all online orders in a timely fashion,” said Neil Saunders, managing director at GlobalData Retail, a research firm. 

“On the shop floor lines may be longer and there will likely be fewer staff to assist customers,” he added: “This is going to be a challenging holiday season for retailers.”

Several had already raised wages since the pandemic began, with Walmart boosting the minimum hourly rate at its Sam’s Club from $11 to $15 this month. But in a labour market this tight, the largest companies are also dangling novel incentives that go well beyond what they have offered in previous years. 

Line chart of Average hourly earnings ($) showing Retail wages have climbed through the pandemic

Amazon is touting signing bonuses of $3,000, Dollar General is offering drivers $5,000 starting bonuses, and Macy’s is paying its existing staff up to $500 if they refer a friend or family member. The department store chain, which hopes to hire 48,000 seasonal workers, is telling prospective applicants that job interviews can be done online in just five minutes. 

Walmart has cut its hiring process from two weeks to about 24 hours, while making it easier for new hires to qualify for subsidised college tuition. Best Buy, too, is offering seasonal employees discounts of 5 to 25 per cent on college fees, on top of cheap gym memberships and savings on insurance plans for their homes, cars or even pets. 

Mindful of the risk that staff shortages might endure beyond the end of the year, more retailers are also tailoring those incentives to encourage seasonal recruits to stay, said Professor Mark Cohen, director of retail studies at Columbia Business School. And as they vie with each other to offer higher wages and bigger perks, some are adding inducements for their more experienced staff to prevent them from jumping ship.

Target, for example, said on Thursday that it would hire 100,000 people for the holidays, down from 130,000 last year, but would offer existing employees another 5m hours of work over the season at a cost of about $75m.

Big Lots, meanwhile, told analysts last month that it was adding “stay bonuses” to keep existing staff through the coming months, and boosting the discount employees enjoy in its stores from 20 per cent to 30 per cent. 

The inducements on offer have been too little to satisfy those advocating for better conditions for retail employees, however.

“Workers want to see more than a one-time hiring bonus or quick-fix incentives that don’t solve the underlying problems of incurring immense risk and harm to their physical and mental health during an ongoing pandemic,” said Bianca Agustin, corporate accountability director at United for Respect.

Retailers should instead be raising basic pay to at least $15 an hour, providing another $5 per hour in “hazard pay”, guaranteeing adequate paid time off and giving workers a voice in decision making, she argued.

Perks are not the only strategy retailers are resorting to. Craig Johnson from Consumer Growth Partners, a consulting and research firm, said that some stores were now adding self-service registers to save on checkout staff or redirecting consumers to their ecommerce operations, which need fewer people to fulfil orders.

But incentives are now driving retailers’ “scramble for employees”, said Cohen, and “retailers who are unable to do it will struggle to fill their positions”. 

Most independent store owners fall into that category. Smaller retailers have shown “a fantastic amount of innovation”, said Nela Richardson, chief economist at payroll processor ADP. But, she added, “where small firms cannot compete is on minimum wage”.

That is borne out by polling. In the past three months, the share of small retailers saying they were finding it very difficult to hire jumped from 47 per cent to 62 per cent, said Chuck Casto of Alignable, which conducted the survey. 

Giddon’s company is among them. “We cannot do tuition reimbursement” or the other perks big retailers are offering, he said. “We are a small company. It’s impossible for a small guy to compete with [the] big guys.”


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