Why Communities Across America Struggle to Fill Jobs
When both unemployment and wages are low, it's going to be difficult for employers to find the workers they need. They need to understand that from the outset.
Though hiring managers are struggling to fill jobs across the nation, the shortage of workers facing the country's employers is particularly pronounced in the Midwest, according to a recent Wall Street Journal report. While the Journal's analysis is insightful, in my community the struggle to fill jobs is more than just a story. It is the day-to-day reality, and it's about to get worse.
In March, Amazon announced that it would build its first Missouri fulfillment center in my suburban St. Louis county, bringing about 1,500 warehouse jobs to the community. That news was coupled with similar announcements by another online retailer, Grove Collaborative, and by the mortgage loan servicer Cenlar FSB. In one week, these three employers announced that they would bring a combined 2,100 new jobs to our county.
More than two thousand new jobs coming to your community is good news, of course. But there's a catch: New jobs in a place like ours experiencing historically low unemployment will create added pressure on existing employers who already struggle to fill positions, to say nothing of the challenges that Amazon, Grove and Cenlar may face. While one might expect that market forces would take care of that problem -- driving wages up to attract more people into the workforce -- that hasn't happened. Despite recent minimal increases, when adjusted for inflation the average wage-earner's income has stagnated for years, and in some cases for decades.
One of the most striking features of economic development (at least in my region) is a continual recurrence of the same conversation. It usually focuses on a specific employer struggling to fill positions that are objectively low-wage but subjectively labeled "good jobs" by employers and economic developers.
In an attempt to explain the unfilled jobs, some economic developers will cite the supposedly historically poor work ethic of a specific demographic that should, in the minds of some, consider themselves lucky to have a job at all. That conversation goes something like this: "(Fill-in-the-blank employer) has 20 jobs open, but can't fill them because millennials feel entitled, don't want to work, aren't willing to start at the bottom, etc., etc."
That might make a good sound bite, but there are forces at work other than just the alleged laziness of an entire generation of people. The Amazon jobs coming to my county illustrate why employers struggle to find workers and why economic developers need to discuss the realities of the local labor market during the recruitment process.
The average Amazon fulfillment worker makes somewhere between $24,000 and $28,000 a year, depending on the location. An annual salary of $26,000 means a full-time worker is making $12.50 an hour. If those workers have to drive to work (which they will in my county) and have child-care expenses, the actual net salary is closer to between $6 and $8 an hour. That is why such a high percentage of Amazon fulfillment workers receive food stamps.
Working full-time while needing food stamps is no one's idea of a "good job," and using taxpayer-funded incentives to recruit employers to bring low-wage jobs into cities and counties with almost no unemployment is not a winning economic development strategy.
Of course, most economic developers are not incentivized to fill employers' vacancies, much less to focus on the economic insecurity of an employer's workforce. They are rewarded for bringing new companies to town. That doesn't mean that economic developers don't care. Every economic developer I've worked with does care about both the employer and the workforce -- they are just often reluctant to talk about one particular topic, possibly because broaching the subject may scare employers away.
That topic is wages.
An employer complaining about an inability to find reliable, quality workers at $6 to $12 an hour is sort of like me complaining about not being able to buy a reliable car for $1,000. Wages are, like any other good, subject to the law of supply and demand. If you can't find the workers you're looking for at $12.50 an hour (or less), you're going to have to increase the price you're willing to pay.
Employers may not want to talk about that, but economic developers and elected officials need to have the courage to tell businesses they're trying to attract that they may have to spend more to find the workforce they need. They also need to have the courage to tell big companies that low-wage, food-stamp-subsidized jobs are not the ones that create healthy communities or healthy economies. Of course, that requires an economic development strategy that is built on a stronger foundation than just cheap labor.