“There wouldn’t be a seafood industry without foreign workers. There wouldn’t be sugar either.” according to “Jim” (not his real name), the owner of a large seafood and fish processing company. “Without the guest worker visa program, we wouldn’t have anyone working in the plant and the sugar cane farmers around here wouldn’t either.”
A few days later, I met with the owner of a plastics manufacturing firm. He said that demand for his production capability is very strong but a combination of equipment capacity and labor is a challenge that is holding back growth.
In two recent meetings with business owners, the subject of labor came up in conversation. The ability to attract and hire workers to operate and grow their businesses is a major issue.
The Problem
A quick Google search tells me that the labor market is tight. Article after article explains that companies in the US are having trouble finding workers to fill slots that keep production running and companies growing. Hiring and job creation appear to be strong.
Survey
To find out more, I ran an unscientific survey on social media and email and although I got a small number of responses, the results are interesting. Among the respondents, labor is a key issue and it’s holding back growth – at least somewhat.
- Skilled and unskilled labor represent the biggest challenge
- Companies are offering overtime to entice their workforce to produce more and to attract workers
- The use of temporary labor continues to be a standard practice as companies hire several workers, try to outnumber attrition (more on that later) and vet the workers for skill, aptitude and dependability before converting them to permanent employees months later.
Funny (sad) Stories
For most of us the idea of starting a job with a company only to quit within minutes or hours seems incredible. It came as a surprise to me that this is commonplace and in fact, I had to laugh at what I heard.
The plastics manufacturer said his company brings in 5 workers at a time from a temp service. Of those, two most likely quit and walk out before the first break of the day. Why? “Some say the work is too hard. Others say it’s too hot. Some don’t give any explanation at all.” By the end of the first day, one may still be on the job.
With unemployment benefits so easy to come by, a good percentage of applicants only look for work because they’re required to so they can keep getting an unemployment check. Every 6 months, someone on unemployment must prove that they tried to find work. As a result, many workers get hired and quit as soon as the requirement is met. That way, they can go home, sit in the air conditioning and collect six more months of unemployment.
Is this all there is to it?
While the labor market seems to be tight, at least one group feels it isn’t so. A recent Marketwatch article sites a research project by NGDP Advisors that says the labor market isn’t tight after all.
According to NGDP, if the labor market was as tight as many feel, wages should be increasing much faster. As it is, wages are relatively flat, while inflation chips away at purchasing power. “A strong labor market is characterized by a high employment-to-population ratio and a high labor-force participation rate,” the economists at NGDP Advisers write. Since the labor participation rate is still at historic lows, the market can’t be as strong as it would seem. This would explain why wages aren’t increasing overall.
Conclusion
Whether real or imagined, labor is an issue for at least some businesses. It’s an issue that is keeping them from increasing sales and growing and it’s also a potential indicator of our economy being near the top of the cycle again. (See my article “Nearing the Top of the Economic Cycle” from last spring.)
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