Economy

Help wanted: Workers finally benefit as labor shortage expands

Finding the patterns

From cake decorators in Boston to farmhands in California, rising employment offers new opportunities to switch jobs and earn higher pay. Some economists expect wage growth to accelerate.  

A worker loads spools of thread at the Repreve Bottle Processing Center, part of the Unifi textile company, in Yadkinville, N.C., in October 2016. Workers switching into manufacturing from professional services saw a 6.9 percent jump in their average annual pay, according to a new study.
Chuck Burton/AP/File
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When news hit in January that Maine was short nearly 100 snow-plow drivers, so many applications came pouring in that the state transportation department was able to fill its quota – except in booming southern Maine. There, despite full benefits and average pay of about $18.50 an hour, the state is still short 10 drivers.

“As the economy improves and people’s opportunities increase, it becomes much more of a struggle to retain good workers,” says the department’s spokesman, Ted Talbot.

In Delaware, the problem is too few prison guards. After months of warnings about the consequences of an acute shortage of guards, this situation turned tragic. In February, inmates temporarily wrested control of part of a large prison and took hostages; one guard was killed.

Now, 16 correctional officers are reportedly leaving as are nearly 30 medical personnel at the prison, forcing the state to scramble to raise salaries and attract new workers for the site.

In Dallas-Fort Worth, it’s construction workers. Some developers in the hot residential market are limiting sales of homes because they don’t have the masons, carpenters, and other skilled laborers to build them. “It's without question the worst labor shortage I've ever experienced," one 28-year veteran builder told the Fort Worth Star-Telegram.

Increasingly, the United States is running short of workers. The shortages are most visible in pockets of the country and in certain industries. But those pockets keep getting bigger. The robust US economy created 235,000 new jobs last month, the US Labor Department announced Friday, above what many economists had expected.

All this is great news for workers, because the shortage is forcing increasingly desperate employers to boost pay and benefits to attract and hold onto recruits in several fast-growing industries. Average wages are starting to grow at rates not seen since 2000, the last time the US confronted a severe worker shortage. The challenge is economic growth: Not having enough workers is already curtailing production in some areas. And if wages and salaries go up faster than corporate profits, companies will see their bottom lines suffer and, potentially, their stock prices fall.

“A labor shortage is not just an HR [human resources] problem,” says Gad Levanon, chief economist for North America at The Conference Board, a global business group based in New York. “It hurts the bottom line.”  

The shortages are worse in some professions and geographies than others. For example, the nation confronts a nursing and primary care physician shortage everywhere, but in rural areas it is more acute. In Yakima, Wash., a doctor will see between 1,500 and 2,500 patients, many of whom are low-income. The loss of physicians there has reportedly left patients with up to three- and four-month waits to see a doctor.

Cake-decorator shortage

Low-paid workers are being lured to higher-paying industries, such as manufacturing, which added 28,000 workers last month after a slowdown. Workers who moved from professional services to factory work saw wages jump 6.9 percent, while those moving from trade into manufacturing saw a 6.2 percent jump, according to ADP’s Workforce Vitality Report.

"Switching jobs is increasing as the labor market tightens," says Ahu Yildirmaz, co-head of the ADP Research Institute in New Jersey. Job-switchers generally are seeing bigger jumps in pay than job-holders, she adds.

That’s making it hard for lower-paying industries to hold on to their employees.

In booming Boston, for example, bakeries and grocery stores are struggling to keep cake decorators from taking their candy molds and piping bags elsewhere. In California, large farms are having to boost pay to keep farmhands on the payroll. Christopher Ranch, which grows more fresh garlic than anyone else in the US, recently hiked farmworker pay from $11 an hour to $13 an hour. It plans to raise it to $15 in 2018. That’s a faster increase than the mandated increase in California’s minimum wage.

Such moves still might not be enough for the nation's large farms. The number of Mexican migrant farmworkers in the US shrunk by more than one third between 2007 and 2010, not because of border enforcement but because Mexicans are finding better nonagricultural jobs in their own country, according to one study. US farmers, not only in California but in the Southeast and elsewhere, have lost $3.1 billion in crop production over a decade because they didn’t have the workers to pick the crops, according to a 2015 study by the Partnership for a New American Economy, a pro-immigrant group.

Immigration is a key component of the worker-shortage problem. While the Trump administration is pushing to reduce illegal immigration and skew the mix of legal migrants toward a higher-skilled group, many industries are calling for more foreign workers of all types.

“Over the next decade, restaurants will likely create more jobs than the US-born workforce can fill,” says the National Restaurant Association, which supports a temporary visa program for nonfarm workers.

Back to the late 1990s?

Even harder hit could be the construction industry. The Associated General Contractors is a longtime proponent of increasing the flow of legal immigrants who are skilled construction workers. Because it’s such a huge industry, construction by some estimates could see the largest financial losses if there are mass deportations of unauthorized immigrants.

By contrast, workers already in the US would more likely benefit from a decrease in immigrants because companies would have to bid up wages and salaries to retain the workers they have. Already, over the past three years, average wages have grown of 4.2 percent even after adjusting for inflation. That may not sound like much, but that means the average American worker is making gains not seen since the late 1990s, when the labor market was even tighter. In 1999, for example, real average wages climbed 7 percent over three years – the strongest three-year spurt in nearly four decades.

Expect the wage growth to continue to accelerate, says Mr. Levanon, especially if the economy again starts creating 200,000 or more jobs every month. Recessions will come and go, which may halt the trend temporarily, he adds. But “in the next 15 years, there will be almost no growth in the labor market” as baby boomers retire, which means workers will be even scarcer.

That will spur companies to become more innovative in how they use workers, such as offering more training opportunities, says Ms. Yildirmaz of the ADP Research Institute.

Back in Maine, the state is giving new recruits smaller snow plows and assignments that don’t require a commercial driver’s license. (It takes about two years to qualify for the license.) But the shortage in the southern part of the state may soon be felt. Portland is expecting up to a foot of snow starting Tuesday, Mr. Talbot says.

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