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Is increased pay the answer to worker shortages?

On Behalf of | Jul 9, 2021 | Employment Law |

As the nation emerges from the COVID-19 pandemic, businesses – especially those in the service and manufacturing industries – have tried to ramp up staffing, only to find a shortage of workers.

Many of these companies found job seekers have little interest in traditionally low-wage jobs ranging from $7.25 to $12 per hour. The worker shortage raises concerns for the country’s economic recovery.

Politicians argue over the cause

Despite an uptick in hiring, the U.S. remains more than 7 million jobs short of what existed before the pandemic. Republicans argue expanded unemployment benefits are to blame. Democrats say it’s more complicated and involves concerns over worker safety, closed schools and a shifting workforce.

The Washington Post looked at a dozen businesses that addressed another element – worker pay – and confronted the tight labor market by raising their minimum pay to $15 an hour. Nine companies raised wages this year, while three did so in 2020.

Companies see immediate results

A nearly century-old Pittsburgh ice cream shop didn’t receive a single application from January to March, while its job posting listed pay of $7.25 per hour plus tips. One week after more than doubling the starting wage to $15 per hour, more than 1,000 applications flooded in.

Within three weeks of raising its starting wage to $15, a Charleston, South Carolina restaurant group went from 50% to full staffing. The owner said he took the step after learning one of his cooks had to borrow money to buy groceries for his family.

Businesses say higher pay makes good business sense

While the companies had concerns over the effect raising pay has on their bottom lines, they say the move brings many benefits, including:

  • Stronger candidates apply for jobs
  • Reduced turnover
  • Reduced costs for recruiting and training
  • Relief for longtime employees
  • Increased worker morale

Nine of the companies interviewed by the Post say they raised prices to compensate for the increased costs. Several have trimmed hours and left seasonal jobs unfilled after workers left. Three businesses have avoided raising prices or restricting hours and focus on the long-term benefits of a happier and more stable workforce.