Peak season labor expectations in an
unpredictable market
Remember 2019?
When the general public didn’t really know what a supply chain is? When finding people to run those supply chains may not have been easy, but at least it didn’t feel impossible?
What a difference three years can make.
After one game-changing disruption after another, remembering “normal” can be difficult. Though not nearly as tough as predicting what it could look like going forward.
And while no one has a crystal ball, we can at least identify what some current trends might mean for supply chain labor as we head into the busy season of 2022.
Potential ease in bonus expectations, but not wages
In some ways, the labor market seems to be cooling off, thanks primarily to basic economics. With the government’s COVID stimulus rolled back and inflation on the rise, people need money.
The challenge for employers is that, over the past 12 months, workers’ expectations were set rather high. Companies desperate for the labor to fulfill skyrocketing demand offered equally high compensation. In some cases, we saw up to $5,000 offered as a signing bonus.
That’s quite a bit of money for someone in a $15-$20 per hour role, which is great for that worker, but the market can’t bear that cost for long.
That’s why we expect perks and bonuses to become less aggressive.
Meanwhile, we expect wage levels to remain consistent, since the inertia of that trajectory will be very difficult to change, especially with gas prices at record highs.
Many large distribution operations are in rural areas where driving long distances to get to work is the norm. Paying $4 to $5 per gallon at the pump will be especially painful for these hourly wage workers. Many of whom will resent the idea of giving up a sizable portion of their pay to commute.
Employers simply won’t be able to afford to lower-wage expectations for the foreseeable future. We expect smaller perks like gas cards to endure as well.
However, here’s the wild card:
With unemployment at 3.6%, will the current wage rate be sufficient to attract and retain enough people? For workers in more stable financial straits, we’ve yet to see what number will lure them either into the labor market or away from a current employer.
We have, however, seen some employers getting creative. Recently, a Kawasaki plant in Lincoln, Nebraska got noticed for its worker attraction strategy.
In an area with 2.1% unemployment, the plant attracted working parents—most of whom had never worked in manufacturing before––by offering $19/hr and work hours that fit around the local school schedule.
Creative. And so far, the strategy has been successful. How sustainable it remains to be seen.
Shortages, buying behavior likely increase scheduling volatility
Yet labor attraction will likely not be the only reason pushing employers to get creative.
Continued material shortages are making it difficult to forecast both demand and fulfillment this peak season.
On the demand side, shortages are prompting some consumers to alter their buying patterns. A Christmas gift, for example, can be purchased now, when they know it’s available, and then saved for the holidays.
On the fulfillment side, ongoing material shortages mean warehouses and distribution centers may not have what they need to deliver orders. Which means they won’t have work for the labor that helps deliver it.
We expect the combined volatility of those two trends will test employers’ labor schedule flexibility, at least in the near term. Whether either of those trends continues for the long term is, at best, a guess.
Expect the unexpected
Overall, labor continues to be tricky. Not just in attracting it, but also in managing and retaining it.
Remember, labor is still enjoying a large amount of influence in the market, and persistent personnel shortages only add to its power. In fact, the National Labor Relations Board reported that union representation petitions increased by 57 percent in the first six months of Fiscal Year 2022––a level not seen in decades.
So it’s no wonder experts are watching negotiations with groups like the International Longshore and Warehouse Union and the Coordinated Bargaining Coalition very closely. What happens in the remainder of this year could reshape how the employer-employee relationship is structured for years to come.
Much like the last three years, the safest prediction you can make going forward is to expect the unexpected.
So the more nimble and adaptable employers can be on their way to whatever the next “normal” looks like, especially during peak season, the better.
If you could use some help staying nimble and adaptable this peak season, send us a message. nGROUP is a staffing and labor management provider that helps labor-intensive operations run a more cost-effective and productive workforce.
The 2021 peak season was unexpected in its own right. At that time, companies were bringing in large groups of workers thinking they would lose most of them due to vaccination requirements, but didn’t. Others lost people due to mandates that later ended up being unnecessary.
nGROUP helped clients in both situations weather their storms. After helping them utilize labor and overtime in creative ways, they experienced no service failures during peak season.
You may not be able to predict what happens this coming peak season, but when it does, having expertise you can trust at your side never hurts. Reach out today.
