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Signs point to increased constraint in the warehouse labor shortage

With the holiday season looming, America's labor shortage is set to widen the current constraints on the supply chain. Learn how the Great Resignation is currently impacting shortage of warehouse workers. 

The current labor crisis

As America attempts to fix record breaking unemployment rates caused by the COVID-19 pandemic, employers are finding unexpected trends in the job market. Workers now have the ability to choose where they want to work and make greater demands in pay and benefits, as there are so many job openings available. Companies in need of labor need to recognize the job market is not returning to pre-pandemic norms. With a more informed group of workers entering the labor force, they hold all the leverage.

While normal ways of life were put on pause during the pandemic, workers had time to research and gain knowledge on their job industry. Some realized their previous job wasn’t worth the pay, others demanded better working conditions. Enrollment rates in unions grew in 2020 after decades of endless decline. Even with states ending COVID-19 unemployment benefits in September 2021, more people left the job force than joined. The numbers are most remarkable among young workers between the ages 20 to 34, per the Bureau of Labor Statistics. Some 14 million young Americans were neither working nor pursuing a position in the month of September.

The warehouse labor shortage

The warehouse and transportation industry have been hit harder than most by the lack of labor availability. Many warehouse workers who were deemed “essential” during the pandemic continued working due to pressure, even when they felt the environment was unsafe. However, new workers to the industry are declining. As the United States is entering a post-pandemic state, job seekers have realized they don’t want a warehouse job due to the often-grueling work required. Some warehouses for e-commerce have workers walking over 9 miles per shift. In others, automation equipment brings goods to packing stations where workers can stand for up to 10 hours a day. Poorly calibrated labor management systems, often used in large warehouses, require workers to work at a very high speed. If laborers are pushed too fast at unattainable speeds, injuries are undoubtedly a possibility.

While seasonal turnover is standard in the warehouse industry, in just four years turnover went from 40.3 percent in 2016 to 59.5 percent in 2020 in transportation, warehousing, and utilities combined. The manufacturing industry experienced a turnover rate increase from 27.2 percent in 2016 to 44.3 percent in 2020. Such high turnover rates are an issue since warehouse labor is needed far past the contract logistics sector – the position is essential for retailers, manufacturers, and distributers to operate. In the coming months leading up to the holiday season, Amazon alone is hoping to add 1250,00 warehouse and logistics seasonal hires. Walmart is planning for 20,000 temporary workers in logistics, and UPS, Kohl’s and Target all are aiming for 100,000 new hires each.

With the holiday season fast approaching, the warehousing and transportation industry is in a time crunch to hire as many employees as they can. Despite high hopes, a record number of 490,000 job openings was reached in July 2021. With millions leaving their jobs each month since, the gap will only widen as companies struggle to maintain productivity during the consumer spending surge around the holidays. In a warehouse labor survey completed by ARC Advisory Group, 35 percent of warehouses experience a seasonal surge in the number of workers they employ of over 20 percent. The survey also found that 8 percent of warehouses have a surge of over 100 percent.

What does this mean for the future?

Companies in dire need of warehouse employees are adapting their hiring strategies to be more appealing, although hiring alone is not the only problem. Retaining their staff, training new hires, and keeping working conditions safe are a high priority. With the new wave of bargaining power in the hands of laborers, companies need to pay more to get more.

In order to gain more hires, warehouse companies are raising their pay. Aldi increased the average starting pay in warehouses to $19 an hour, and Walmart is promising extra pay for supply chain employees who have showed up to all scheduled shifts. Sleep Number is offering sign-on bonuses up to $1000 at their distribution centers in California and Ohio, as well as free mattresses for all new employees.

For retaining current staff, Gap is offering around-the-clock telehealth appointments and 50 percent discounts on clothing. Radial spoke to the Washington Post on their strategy involving daily, high value raffles. Employees could win PlayStations, iPads, and more. Radial has added pizza parties and on-site food trucks to attract around 27,000 workers in 2021.

With the labor shortage no where near over, warehouse companies should consider additional methods to improve overall quality of labor in their warehouse. While making your employees jobs easier, your warehouse can become more efficient and able to maintain demand with less workers. At Körber, there is no shortage of supply chain solutions to help meet your warehouse and labor goals.

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