A Look at the Warehouse Labor Market
As my colleague Clint Reiser wrote about a few months back, warehouse labor has been in the news quite a bit lately. Of course, virtually everyone relied upon direct-to-consumer fulfillment at some point during the COVID-19 lockdowns, placing widespread reliance on warehousing capabilities. In the longer term, warehouse labor has been increasingly in high demand as retail shifts more and more from stores to e-commerce fulfillment. Most recently, attempts at unionization at a number of Amazon warehouses have been in general news and business publications.
In the fall of last year, my colleague Steve Banker wrote that warehouse labor woes are worse than ever. Steve wrote that the warehouse and transportation industry had a record 490,000 openings in July. This gap will widen in coming months as companies struggle to keep up with the Holiday season surge in consumer spending. I had the opportunity to sit down with Steve and talk with Steve about the warehouse labor market.
Below are some key points from our discussion as well as the full video interview.
The Great Resignation
One of the phrases that has been kicking around is the Great Resignation. I asked Steve to explain what this means and how it applies to warehouse labor. Back in the fall, we were speaking of the Great Resignation. More workers had quit the labor force than had joined it; millions of people quit their jobs. Jobs in retail, restaurants, trucking, and warehousing are particularly hard to fill. Meanwhile, the growth in e-commerce is driving the need for ever more workers for the warehouse. Workers are becoming more selective. But this argument can be an oversimplification for a more complex reality.
In the US, three million more workers retired than were expected to retire during the pandemic. For younger workers, however, the financial payments from the government did give many a buffer that could last several months. While workers can be picky in the near term, most will have to come back to work in 2022.
While it seems as though warehouse managers can breathe a sigh of relief, this isn’t exactly the case. These workers will have more choices. Fewer companies are requiring college degrees, for example. The share of young people with an education that extends beyond high school has decreased. Vocational schools shut down during the pandemic. You can learn history remotely, but remote learning is not the right way to teach someone how to be a mechanic.
What this means for the warehouse is that some workers that had worked in the warehouse may be applying for jobs they would have been considered unqualified for just a year ago.
How to Attract Warehouse Workers
To attract the workers needed, companies have been paying new workers higher wages and offering bonuses and better benefit plans. As the young go back to work in 2022, the need to do this will decrease.
Still, many companies are going to have more jobs than applicants. Companies might consider examining their policies around who qualifies for a job and be more open to hiring those with criminal records and the disabled. This will not fully solve the problem, however. Significant wage increases will need to be paid to keep the existing workforce. This will be partly driven by high inflation. But it is also because the high wages paid to new workers, who can’t work at the same level of efficiency as the existing workforce, is creating discontent among the incumbent workers. There are going to be big spikes in raises in the warehouse in the coming year.
In 2022 it is going to be a scramble to retain the warehouse workers we need and hire new workers. But it makes no sense to hire someone who cannot work efficiently, accurately, safely, or is likely to leave after a short period of time. Material Handling Automation, robots, warehouse and labor management system software can all help in some of these dimensions. But ultimately, a warehouse that excels across the dimensions of productivity, accuracy, safety, and employee retention employ a relatively small number of best practices. Most of these best practices are related to the manner in which managers manage their workers.