The Missing Employees

Are you missing employees? Where did they go? I just got off the phone with a restaurant owner who temporarily closed one of his locations so that he could redistribute the staff to the other three. I’ve also heard or seen in the last week:

• A Starbucks closing at 4:00 PM for lack of staff.
• A director in a large accounting firm reporting that two pay raises in 9 months (for remote employees) are being characterized by the 30-something accountants as “non-competitive.”
• Apple employees publishing an internal letter saying the company’s plan to require 3 days a week attendance is “unacceptable.”
• A wire service story noting that only 12% of office workers in Manhattan have returned to their offices.
• The manager of a new restaurant scheduling 27 interviews, then sitting through 26 no-shows.
• Wait times for services businesses that are are unworkable for customers. Our tree trimmer offered me a date 4 months out. The pool contractor’s backlog is seven months. Both claimed insufficient crews to handle the business.

I talk to at least a dozen employers a week, and all are complaining about the lack of qualified applicants. Several have raised their starting wage rates multiple times, with no discernable change in the flow of applicants.

What the hell is going on? To start, I don’t believe that it’s all the fault of supplementary unemployment benefits. It is true that the states which discontinued the supplements have somewhat lower unemployment rates, and that $300 a week is enough to entice a $10/hour employee, but the missing employees are across the wage range.

Factors Driving the Shortage and Wageflation

One fact is that the economic rebound since 2009 has not previously had much impact on wages.  They were bound to catch up at some point. The Federal Minimum Wage of $7.25 an hour is now insufficient to pay for basic apartment rent anywhere in the USA. Supplementary benefits or not, no one wants to put in 40 hours a week and not be able to live on what they earn.

Another is the absorption of women into the workforce. For much of the ’80s and ’90s, women working for the first time represented a net addition to the number of available workers. This had a depressing effect on wages, as there were more bodies chasing limited jobs. The employment market has adjusted to this new normal.

Remote working has frayed the cultural relationship between employers and employees. Where workers often stayed in a job because they had friends there, or were comfortable with their responsibilities, now salary is rapidly becoming the only factor they consider.

The inflationary pressures of deficit spending are shrinking the buying power of static paychecks.

The lessening of COVID-19 is releasing a backlog of employees who “wanted to move anyway,” but were hanging on to what security they had through the pandemic.

Most importantly, over 50% of the Baby Boomers are now over 65 years old. Generation X is much smaller, so these retirements impact mid-level employees and managers the most. The available pool of experienced people is literally shrinking.

Missing Employees and Exit Planning

If you are one of the Baby Boomers who are now 21% of the population but still own 51% of the private companies in the U.S., missing employees will impact you in more ways than just on your daily workload.

• Increased labor costs will have a direct impact on profitability, and therefore valuations.
• The challenge of retaining employees long enough to develop true proficiency is growing. Higher turnover means you’ll need more people for the same tasks.
• The long-term commitment of a relationship where someone is in training to assume control of the business becomes in many cases, unimaginable to an employee.
• Lack of experience in a management team also detracts from enterprise value.
• In businesses that depend on repeat customers, relationships may need to be reestablished regularly.

I saw a cartoon a few weeks ago. An owner is talking to his employees. He says “When we said you were essential workers, we didn’t mean you should be paid like essential workers.” Perhaps they can be forgiven for misunderstanding.

In our mission statements, we often say that employees are our most important asset. It looks like we may have to put our money where our mouth is.