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Economy

The Real Cost of Employment in North Texas

Employers are struggling to keep up with staffing needs, meaning wages are up across the board.

The national minimum wage has remained stubbornly at $7.25 since 2009. Still, current labor conditions in North Texas mean that even for entry-level positions, they have to pay much higher than that to attract employees.

Although many states have voluntarily raised the minimum wage bar (New Mexico: $9, Arkansas: $10, Oregon: $13), Texas hasn’t changed its minimum wage requirement. But that doesn’t mean that employees are willing to work for those wages, and conditions in 2021 have employers offering much higher hourly rates to attract acceptable applicants.

According to the Bureau of Labor Statistics, job openings reached a record high of 9.3 million in April, with the most significant increase in accommodation and food service (349,000 new job openings). The quit level also reached a record high of 2.7 percent, totaling 4 million in April, while layoffs reached a record low of 1 percent. Openings in construction and manufacturing increased in April, but hiring declined in both sectors.

Around the country, Amazon is offering $1,000 bonuses for COVID-19 vaccines, McDonald’s is offering $50 just to come to an interview, and other retailers are offering $1,000 or $2,000 to future employees for hundreds of open positions.

Here in Texas, unemployment is at 6.5 percent, and Texas Labor Analysis shows increases in the help wanted for nearly every foodservice position and hotels, housekeeping, and retail. The need for jobs is leading to wage increases. The first quarter of this year saw the largest wage growth since 2001, according to the BLS. Consumers are paying the prices for the increased costs and wages. Between May 2020 and May 2021, consumers saw the largest increase in inflation in 13 years. Stimulus payments, lingering fear about the virus, childcare needs with closed schools, and extended unemployment benefits are behind the labor shortage.

Local employers face similar challenges, says Travis Floyd, the director of operations for Bushwood Investments LLC, which owns 40 Jimmy John’s locations, including 11 in Dallas-Fort Worth.

“For myriad reasons, staffing has been difficult,” Floyd says. “It is unprecedented relative to anything that I’ve seen in the last 15 years, and you combine the difficulty staffing with the increased customer volume, and that makes it difficult for operators.”

He says at many of his stores; they need three times as many people as they have to work. With more customers and fewer employees, it has been a stressful experience, and the company is making adjustments to solve the problem.

“We’ve done a lot of things, and some of that is increasing wages in all of our markets, not just for entry-level but across the board,” Floyd says. “We’ve directed a lot of resources into recruiting with spends on job boards and in deploying people in our office to be more involved in the recruitment and hiring process in the field. We have also devoted more money to referral bonuses for existing employees. That’s been successful for us is incentivizing our current crew members to recruit their friends or acquaintances to come work for us.”

Texas-based electrical parts distributor Elliott Electric Supply has 160 stores across the south, including several in DFW. Taylor Kulovitz is the area operations manager at Elliott, says that one Dallas-area warehouse normally employs 120 people. Right now, they are working to keep 95 people on the books, and the labor market is so hot that employers are scrambling.

“It used to be that you had to look at 50 resumes to get five people, but now you look at several hundred to get that many,” Kulovitz says. “Getting them to show up for work or once they accept is another challenge, as they are often changing their mind or accept another position and don’t show up for the job they have accepted.”

Kulovitz says he has heard about a staffing agency offering a $50 daily bonus for showing up to work for the first week. At Elliott, the company has raised wages on the lower end by 15-20 percent over the past year to meet its staffing needs. And because of labor shortages, he says the company has to pay more for employees with less experience, not more. The staffing shortages and less experienced employees are creating problems down the road.

“This is the most challenging hiring season I  have seen in my career,” Kulovitz says. “We could be doing more business if we had the right number of people. Instead, we’re having to prioritize daily tasks, which is hard since they are all important. Incomplete tasks are stacking up that would typically be addressed, but we’ll have to tackle those issues another day.”

Floyd says that in 2019, an entry-level position would have paid $9-10/hour, but now it takes at least $12/hour to attract employees. But merely increasing the pay isn’t the only strategy the company uses to make sure its stores can run effectively.

“We talk to our leadership teams about the importance of creating a good work culture,” Floyd says. “People want to work where they’re shown how to do things so that they can do a good job and feel like they’re successful. If they don’t feel like they’re successful, then they’ll go some someplace where they are.”

Later this month, Texas is opting out of more federal unemployment assistance, which includes an extra $300/week that Congress authorized earlier this year, as well as assistance for gig workers. That will likely force more people back into the market for work, and Kulovitz says he has seen an uptick in responses in recruiting.

But once wages have gone up, it is unlikely they will come back down any time soon, even if the labor shortages subside.

“I don’t see that changing any time soon. It’s where we are right now, and that’s where we’ll be for a while,” Floyd says.

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