The U.S. economy is rebounding at an unprecedented rate, but the ongoing labor shortage continues to give retailers headaches — and may remain an issue into the crucial holiday season.
In a recent survey of retail executives conducted earlier this month, Korn Ferry found that 51% of participants are having moderate trouble hiring store employees, while 36% reported facing significant challenges.
“The challenge is right now we have probably the worst labor shortage in my entire career,” said Craig Rowley, a senior client partner with Korn Ferry. “We have something like 9 million jobs open and 9 million unemployed people in this country, but of those unemployed, maybe 3 million of them are in transition and aren’t looking for work. And somewhere between 5 and 7 million people have dropped out of the workforce during the pandemic.”
The Bureau of Labor Statistics reported that for the month of June, the U.S. unemployment rate remained unchanged at 5.9%, with roughly 9.5 million people out of work, despite the fact that most industries, including retail, have a dearth of unfilled positions.
In recent months, industry leaders have credited the labor shortage to a number of factors, chief among them the government’s extra unemployment benefits and three stimulus payments, which may have disincentivized lower-paid workers from returning to the labor force.
Rowley said the newest factor is President Biden’s recent child tax credit, which offers families monthly payments of roughly $300 per child. “If you are working part time, 15 hours a week, making $10 an hour ago and, say, you’ve got three children and were paying for child care. Now you get $9,000 [annually] for your three children, so you don’t necessarily have to go back to work,” he explained.
The government’s additional unemployment benefits are expected to end on Sept. 5, and retailers have expressed hope that job applications will begin to pick up in August and September.
But Rowley believes the worker surge will be slow to materialize because Americans have a surplus of funds in their bank accounts. “I’m quite concerned about seasonal people who are hired for Christmas,” he said. “When people take a second job to work 10 or 20 hours a week at Christmas, it’s because they need more money to buy presents. But if you’ve been fortunate enough to have your job all the way through the year, you’ve saved a lot of money because you didn’t go on vacation or out to dinner or buy clothes. So your bank account is looking pretty fat right now.”
To lure in interested workers, retailers are working to become more competitive.
In the Korn Ferry study, the majority of respondents said they are taking new or additional steps to attract or retain workers, including increased marketing to create awareness, utilizing referral programs and participating in special job fairs.
In addition, monetary incentives have also become increasingly necessary. While 86% of retail executives told Korn Ferry they do not offer sign-on bonuses to employees, 65% reported that they either have already increased their start rate for store employees this year or plan to increase it later this year. Among those retailers surveyed, roughly half currently offer starting pay between $9 and $11 per hour.