No end in sight: tight labor market will likely persist for years

Help-wanted signs are still abundant throughout the region with plenty of employers looking for workers to fill open positions.

And that’s not likely to change anytime soon.

Conservatively, 200,000 or more workers died during the pandemic, the voluntary quit rate has been running about 25% higher than prior to the pandemic, and some are estimating that 1.6 million people have been forced to take off or work less because they’re suffering from ongoing health issues as a result of long COVID-19 ― which the CDC has estimated has impacted one out of five adults. 

The thinner supply of workers has resulted in employers paying more to fill positions, meaning that businesses capable of providing better wages and benefits have been in a lot better position to fill vacancies than those involved in lower-paying jobs in retail, foodservice and hospitality, for example.

“I think the labor market has improved, but it’s a mixed bag,” said Jeff Rea, president and CEO of the South Bend Regional Chamber of Commerce. “The businesses paying competitive wages and benefits are having a lot fewer difficulties than those offering less.”

And workers are willing to drive for those jobs.

According to economic development officials, about 18,000 people leave St. Joseph County each day for jobs throughout the region, and the overwhelming majority ― about 14,000 ― travel to Elkhart County for often better-paying jobs in RV and boat-building factories.

The RV industry specifically has shown some recent signs of slowing down a bit from the peak of the pandemic in 2020 and 2021 when consumers were flocking to dealerships looking for safe recreational options at the height of COVID-19.

Tight labor market:How local businesses are surviving.

Though still high by historical measures, the RV Industry Association has been reporting reduced levels of shipments to dealer lots the past couple of months, and factories have responded by cutting hours and jobs or closing plants altogether.

The most recent industry forecast projects RV shipments for 2022 to range between 537,800 and 561,900 units with a most likely year-end total of 549,900 units, an 8.4% decline from the 600,240 shipped in 2021 but still enough to be the second-best year ever for the industry.

Stiff competition

The more cyclical nature of the RV industry is one of the factors that can help some local employers such as Steel Warehouse in South Bend attract and retain workers, said Charles von Herrmann, vice president of human resources for the company.

“We’re pretty consistent, and we offer competitive pay and great benefits,” von Herrmann said. “But even still, there’s a scarcity of millwrights, electricians, mill operators and other skilled trades because so many have left the workforce due to retirements.”

Unless there’s a deep recession ― which is considered unlikely by most economists ― it could get even tougher to find employees for at least the next few years as new employers are moving into the area, creating more competition for workers.

Amazon is expected to hire about 1,000 workers for an 800,000-square-foot distribution hub it plans to open next year along the Indiana Toll Road in Elkhart County. The company has said it will offer employees average starting pay of $18 an hour as well as benefits.

And Ultium Cells, a partnership between GM and LG Energy Solution, has indicated it would need 1,600 workers if it proceeds with plans to open a battery factory for EV vehicles in western St. Joseph County near New Carlisle by 2025.

The company, which expects to make a decision on where to locate the 2.5 million-square-foot plant in the coming months, said jobs in the plant would average about $47,000 per year, offer comprehensive benefits and a clean and climate-controlled work environment.

A company official also said Ultium would not actively oppose unionization efforts should it decide to build the proposed $2.4 billion plant here. And if it decides to do so, the massive factory could attract some other related businesses to the region, according to economic development officials.

Though winning the Amazon facility and potentially the Ultium plant is great for the region, it’s the type of news that can send shivers down the spines of those involved in hiring for restaurants, hotels and other portions of the service industry.

Pressure on employers

With the labor market already tight, von Herrmann has a hard time figuring out where those workers will come from.

“There are so many very powerful forces at work, it’s almost impossible to foresee the labor situation,” he said. “But looking at the availability of people now, you have to worry whether additional demand for labor could end up draining some mom-and-pop shops.”

That could happen, said Michael Hicks, an economist at Ball State University. But the thin supply of labor and the resulting upward pressure on wages also has forced businesses to look for ways to boost productivity or employ other creative measures to get through.

Some restaurants, for example, have opted to remain closed when there aren’t sufficient patrons to justify the labor costs. Retailers have installed self-serve checkout lines, fast-food restaurants are using self-serve kiosks for ordering and many hotels have eliminated daily housekeeping for guests staying multiple nights.

Seismic shiftWorkers want higher wages, more flexibility

“Employers are going to have to pay substantially higher to get the labor they need,” Hicks said. “I see continuing tightness for employers, especially those who are more dependent on lower-wage workers.”

Andrew Butters, an economist at Indiana University’s Kelley School of Business, said the tight labor market has given employees ― especially those willing to change jobs ― the type of power they haven’t seen in decades.

Companies will have to continue to look for ways to make use of automation and other technologies as a way to compensate for the tighter labor market as a result of the pandemic and the aging of the workforce, he said.

“It’s a problem that isn’t going away soon,” Butters added.

This article originally appeared on South Bend Tribune: Michiana's tight labor market isn't going away anytime soon