Labor shortage gives retail and restaurant workers the edge

Denny’s restaurant chain recently mobilized its 53-foot kitchen truck. Instead of serving pancakes and coffee to victims of natural disasters as usual, he had a different mission: a nationwide recruiting tour.

Employers go further to attract workers. CVS Health has dropped the requirements for entry-level job applicants to have a high school diploma. And Walmart is handing out bonuses to warehouse workers to stay on the job this summer and fall.

For many low-paid workers, the tightening labor market means that the situation has turned with employers. The desire of businesses to fill job openings quickly has grown more urgent, as retailers gear up for the holiday season and restaurants rush to catch up with months they have had to temporarily close or see a sales crater. . This has translated into higher wages and benefits for employees.

Over the past few months, Chipotle Mexican Grill has increased hourly wages and introduced referral bonuses, while McDonald’s is paying millions of dollars to help franchisees pay more for its employees and even run a childcare program. ’emergency. In the past week alone, Walmart, Target and CVS Health have all announced measures to try to entice new workers and keep existing ones.

“We are in a situation where bargaining power and the labor market have shifted towards job seekers, especially in recent months,” said Nick Bunker, director of economic research for North America at Indeed Hiring Lab.

Several data points paint a picture of these changing dynamics. Jobs in the United States hit a record high of over 10 million in June. According to Indeed’s analysis of data from the Bureau of Labor Statistics, drop-out rates have increased the fastest among industries often associated with lower wages, led by the entertainment and hospitality industry and followed by manufacturing and retail. And for the first time, the average salary of restaurant and supermarket workers exceeded $ 15 an hour, according to the BLS.

Unemployment rates in food service establishments and the retail sector are lower than the overall U.S. rate by 5.4%, 8.4% and 6.4%, respectively, according to the Bureau of Labor Statistics, in July .

CVS chief executive Karen Lynch said the competitive environment has forced the drugstore chain to put in place plans to raise its minimum wage from $ 11 an hour to $ 15 an hour by the next summer. It also grants a raise to higher paid employees, such as pharmacy technicians.

“The job market is very tight, and we are responding to it with our overall wage increase,” she said on CNBC’s “Closing Bell” show.

Likewise, McDonald’s announced an average wage increase of 10% for hourly employees at restaurants at company-owned establishments in May and urged its franchisees to take similar action. The fast food giant operates about 5%, or about 650, of its US restaurants.

McDonald’s US director of human resources Tiffanie Boyd said the move was already paying off. She said that during June, the last full month of data available, the burger chain experienced its “biggest month of hires in the past two years.”

Target is rolling out a new perk this fall: debt-free college education for part-time and full-time workers. CEO Brian Cornell said it’s a way for Target to be an industry leader in compensation and benefits.

“We think it can make a big difference to our teams and just make sure Target is a great place to work,” he said on CNBC’s “Closing Bell” show.

So far, more than 10,000 employees have signed up for more information on the program, which will launch in the fall, said company spokesperson Shandra Tollefson.

In meat packing plants and supermarkets, the employers’ struggle to find workers has given unions an advantage in contract negotiations, said Marc Perrone, president of the United Food and Commercial Workers International Union. The union represents around 1.3 million people at companies such as Kroger, Albertsons, Macy’s, Tyson Foods and CVS.

He said the union was more likely to push for higher wages, workers were able to accumulate more hours, and companies had maintained or improved their benefits. He attributed part of that to the union having a voice at the table, but he also attributed it to the larger economic landscape.

“People have come to the conclusion that they are worth more money and that has helped raise the wage floor,” he said.

Additionally, he said, the risk of contracting Covid-19 has opened the eyes of employees and prompted some to withdraw from the industry. Some waited on the sidelines because they were receiving unemployment benefits that were higher than their own wages. Others have sought different careers that allow them to work from home or interact with fewer strangers.

Yet for some retail workers, higher wages and benefits seem both lagging and insufficient. Adam Ryan, a Target store associate and liaison for the Target Workers Unite employee coalition, said the company’s announcements only look good because retail industry standards are so low.

Target raised its minimum wage to $ 15 an hour last summer, a goal the company had been working towards for years. Starting this fall, the retailer said it will cover all tuition and textbooks for part-time and full-time workers pursuing undergraduate studies at more than 40 institutions. It will also pay up to $ 10,000 each year for graduate degrees.

Ryan, who works part-time at a store in Christiansburg, Va., Said he viewed the changes as “a largely superficial posture.” For example, he said, even though retail workers get a higher starting salary, some of his colleagues have struggled to get a full-time work schedule that provides them with a stable income and qualifies them for health benefits.

Rising inflation also means higher wages won’t extend that far. In July, consumer prices rose 5.4% from a year earlier, according to the Ministry of Labor.

“If they advertise that they’re going to start paying $ 20 or $ 25 an hour tomorrow with full-time status, I guarantee you there would be a lot more applications,” Ryan said.

Target said in a statement that it had focused on giving employees more hours, reliable schedules and career opportunities. He said he has “worked one-on-one with team members” on this over the past year.

Indeed’s Bunker said he believes the balance of power is always on the workers’ side – for now. Businesses may be less willing to spend more if Americans re-enter the workforce and pass on the other side of a hiring wave.

Enrique Lopezlira, director of the low-wage work program at the Labor Center at the University of California at Berkeley, said that while some hourly workers have benefited from the new incentives, others remain stranded due to health concerns and d ‘other challenges related to the pandemic, such as a lack of childcare.

Businesses and workers face new uncertainty – and tough judgment calls – as the delta variant of the coronavirus leads to a spate of Covid-19 cases and hospitalizations in parts of the country with low vaccination rates, like Florida and Texas.

“There is certainly concern that if the delta variant continues to spread and we are not able to contain it as well as we would like, some of the same groups that have been most affected by the pandemic – women and workers of color – who are still struggling to recover will take a double hit, ”Lopezlira said.

Many retailers and restaurants cut their Covid-related sickness benefits months ago. McDonald’s, Target and Walmart are among the companies that have reinstated mask warrants in counties with high Covid transmission rates, but employees are responsible for enforcing the policy on customers.

Some employers, like Tyson Foods, have imposed vaccine mandates on their workforce, but retailers and restaurants have largely avoided similar policies due to concerns that a mandate could scare some applicants or lead to rates. higher resignation rates.

For example, Walmart requires company employees to get vaccinated, but does not require stores or warehouse workers to get them. In New York, restaurant workers will need to prove they’ve received at least one shot of the vaccine, in addition to checking proof of vaccination for diners inside.

Tilman Fertitta, CEO of Landry and owner of the Houston Rockets, told CNBC’s “Power Lunch” on Aug. 3, which once again put restaurants in a tough spot. He said he wanted everyone to get vaccinated, but refrained from requiring the vaccines for fear of losing workers.

“I haven’t mandated him yet, because I would probably lose 18% of my workforce and have to shut down,” he said.