The Retail Worker Shortage: Why Are Companies Having Trouble Hiring?

·9 min read

Employees might be the hottest commodity this holiday season. Amid continued supply chain headwinds and consumer woes over speedy holiday gift-giving, retailers are facing another predicament: where to find and how to retain front-line workers.

“The underlying source of this is an imbalance between supply and demand,” Craig Johnson, founder of Customer Growth Partners, a retail advisory group, told WWD. “The growth in demand for retail services, as reflected in sales, has been far stronger than the growth in the supply of labor needed. The demand has outpaced the ability of the supply chain and the labor [market] to accommodate, whether it’s front-line workers, cashiers, people who work at distribution centers or truck drivers. The growth simply overwhelmed the ability of the labor market to have enough people to accommodate the higher levels of sell-throughs.”

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Broken down, that translates to a 14 percent increase in overall retail sales — including all general merchandise, apparel and food purchased for consumption at home (sans gasoline, automobiles and restaurants) — from January 2021 to September 2021, compared with the same time in 2020, according to U.S. Census Bureau.

At the same time, there are fewer people in the workforce than there were in pre-pandemic times. In September, the labor force participation rate was 61.6 percent, down from 63.3 percent in February 2020, pre-COVID-19, according to the U.S. Bureau of Labor Statistics.

“That’s a dip of about 4 million people in the labor force,” Johnson said.

A clothing store in South Dakota is looking for workers. - Credit: AP
A clothing store in South Dakota is looking for workers. - Credit: AP

AP

The tensions arise not only from fewer workers in the labor market and a greater demand for goods, but also more government aid, the continued threats of COVID-19 and the growth of the underground economy.

“There was a host of new money coming in [during the pandemic] and many people particularly people on the modest income level found that they could make more money by staying at home and not working than by working,” Johnson said, referring to the extended unemployment and SNAP benefits, along with stimulus payments.

“People often, not always, but often respond rationally to a set of incentives,” he added. “The incentive that they saw this time was to stay out of the labor force.”

There’s also health concerns amid a pandemic that hasn’t technically ended. Even with the vaccine, the chance of a breakout infection still exists. At the same time, many states are lifting their mask mandates. This is particularly problematic for front-line workers who come into contact with the general populace every day.

Others are being forced out of the workforce because of lack of child care options.

“It’s creating just a really difficult situation for working parents, the uncertainty of it,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, an outplacement and career transitioning firm. “A kid’s school could get shut down for a week and a half, 10 days, at any point in time. And parents then, who work in-person jobs, have no way to accommodate that.”

More recently, some workers have voluntarily left the labor pool because of mandatory vaccinations at some companies or even municipalities or mask mandates. Rather than get vaccinated or wear a mask, some people have opted to simply not work.

There’s also the growing cash economy, or what Johnson calls the “underground economy.” People who are working but receiving cash for their services, and therefore not showing up in government statistics. In addition to sometimes higher wages than at entry-level retail jobs, people who opt for cash also remain eligible for government money, such as stimulus checks.

“And there’s a ton of that going on out there,” Johnson said, citing the continued growth of marijuana and other agriculture sectors as growing industries and therefore employment options.

“The estimates are that the underground economy is 7 or 8 percent of the total economy. Maybe even more,” he said. “It draws people off of conventional jobs. And the retail sector is by far the single biggest employer in the country. So these labor shortages hit retail the most.”

That includes not only in-store retail workers but also transportation and logistics employees, distribution and call center associates and warehouse employees. Johnson estimates that retail accounts for about 25 percent of all jobs. According to the U.S. Department of Labor Statistics, of the 154 million people working across all sectors in 2020, approximately 14.9 million were in-store retail workers, or just under 10 percent. Another 5.6 people worked wholesale and 5.5 million in transportation and warehousing.

An inability to staff these jobs causes problems for everyone. For consumers this means longer lines at stores, fewer workers in-store and online to assist with questions or orders, longer delivery times, items more likely to sell out and less product to simply choose from. Meanwhile, companies across the retail sector are on a hiring spree, dangling higher wages and attractive bonuses to would-be employees as incentive to sign on.

“It’s a scrappy crazy fight [for workers] right now,” Challenger said. “Companies are in hiring and retention mode and job seekers have a lot of power to make demands at the moment.”

The examples are everywhere. Amazon recently said it plans to hire 150,000 temporary workers for the holidays, with an average starting wage of $18 an hour, a $3,000 signing bonus and an extra $3 an hour for some shifts in select locations.

Last month, Macy’s revealed plans to hire roughly 76,000 full- and part-time workers across its brands, stores, distribution and call centers, about 48,000 of whom would be seasonal jobs, while the rest would lead to permanent positions. Kohl’s Corp. said it was looking to add about 69,000 seasonal associates, including staff for the retailer’s new e-commerce fulfillment center and beauty advisers for the Sephora shops-in-shop at Kohl’s stores.

Walmart plans to hire an additional 20,000 permanent full-time and part-time workers across its supply chain with an average starting wage of $20.37 an hour. Nordstrom is seeking 28,600 seasonal and regular employees for its Nordstrom and Nordstrom Rack stores in the U.S. and Canada, as well as for its supply chain facilities in the U.S. and customer care teams.

“There are millions of open positions, but many employers are having trouble keeping up with their applicants, taking too long to reach out, not making offers fast enough, or losing out to more attractive offers,” Challenger said. “Part of that is to try to lure people back into the workforce. But also, another part of that is to keep those workers there for a period of time. The quit rate is the highest it’s ever been. People are leaving their jobs really quickly, moving to other companies.”

In August, a record 4.3 million people quit their jobs, an increase of 242,000 people, according to the U.S. Department of Labor. There were also 10.4 million job openings that same month.

Many companies, in order to stay competitive, are increasing wages. The list includes Target, Walmart, Amazon, Lululemon, Under Armour and Tapestry’s Coach and Kate Spade. “And that’s having a modest effect so far,” Johnson said.

But some companies are getting more creative. In addition to permanent wage increases, Target is giving hourly workers in stores, service centers and supply chain positions, as well as some headquarter positions and seasonal team members, an extra $2 for select hours during the peak holiday season. The company also said it would offer its existing employees more hours and flexible schedules this holiday season — rather than hiring more seasonal associates, as it has in years past.

A representative for Target was quick to add, however, that the company is not having trouble hiring for the holidays.

“We’re seeing reduced turnover across all team member demographics,” a Target spokesperson said in a statement. “Target receives millions of applications each year and continues to hire significantly to meet the needs of guests. The temporary $2 extra an hour is in recognition of the Target team’s continued hard work to serve guests and the critical role they play in driving our business forward.”

More perks can be found throughout the retail sector, including signing bonuses, extended benefits and faster turn-around times for job applicants. Walmart and Target are offering college tuition assistance to employees. During the pandemic, Walmart also decreased its hiring-process timeframe from two weeks to 24 hours. UPS recently upped the ante, offering potential employees a job offer within 30 minutes of applying, in an attempt to snag 100,000 seasonal associates between October and January.

“Basically, companies are trying to figure out ways to make the job better,” Challenger said. “That means better working conditions, better hours, more flexible hours. They’re trying to make it attractive and trying to be the first, best option for workers.”

Other retailers have ramped up the number of self-service cash registers in stores, which requires fewer people. In anticipation of supply chain shortages, American Eagle Outfitters began buying up extra air freight and shipping containers earlier in the year, while Walmart, Target and other retailers have begun chartering their own ships.

At the same time, smaller companies, many of which had a hard time just trying to stay afloat during the pandemic, are finding it hard to compete in the mass hiring spree.

“Other retailers are offering very aggressive wages to attract labor into their warehouses, which is causing shortages for everyone else,” said Donny Greenberger, chief operating officer of Gelmart, an intimates apparel manufacturer.

Now that extended unemployment benefits have ended, many people could be forced back into the labor market in the coming weeks or months. In addition, a greater number of people are getting vaccinated, either by choice or necessity, which might make an otherwise reluctant individual feel safer about applying for an in-person job. But, Johnson said, the labor shortage won’t end until after the holiday shopping season has passed.

“Anybody who thinks this problem is going to get solved in time for Christmas is living in a dream world,” he said. “This will affect holiday sales. It’s not going to make it a down year like last year. But, it will depress sales if the goods don’t get into the store on time. It’s just a fact of life: if it’s not in stores on the shelves or in fulfillment centers for people to buy, then people are not going to buy it.”

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