This Week's Herman Trend Alert

in Normal 2.0


  The Herman Trend Alert

June 21, 2006

Competition for hourly employees is intensifying

In the late 1990s, we saw an increase in competition for good workers. To entice prospective employees to join organizations, recruiters offered higher salaries, more comprehensive benefits, and high-dollar incentives like automobile leases, stock options, or lavish gifts. As the momentum picked up, the cost of hiring people went up and employers began raising prices of their goods and services to generate needed funds.

In recent years, with a slowed economy and less need for employees, the competitive strategies have not been overt. Many employers now take their workers for granted, not feeling that they must compete for people. This condition will change immediately, when employers discover they do not have enough qualified people to perform the work. Many areas are already feeing the squeeze.

The situation reported in Billings, Montana, is perhaps an early warning of what recurring conditions will be in the near future. Employers in that community are engaged in a bidding war for workers. Signs posted in store windows and shouting from marquees offer USD $6.50, $7.00, $8.00---and more---per hour, in an effort to attract applicants. Few jobs in this competitive environment pay the USD$5.15 minimum wage.

The competition is most evident in the restaurant industry. McDonald’s ($7.00) is in a race with Dairy Queen ($6.50), while the pancake house is paying $8.50 an hour for cooks. Papa John’s Pizza advertises $15 per hour income, which includes a $5.15 hourly wage, $1.20 trip fee, and delivery tips. Tips are unpredictable and lower when customers don’t hold head-of-household jobs. The Papa John’s assistant manager agreed that they had plenty of applicants, but they “lose them quicker than they can hire them.”

Before you dismiss the Billings war for talent as an expected consequence of poor treatment and poor pay for lower talented fast food employees, remember that these jobs are often a starting point for workers entering the job market. Higher wages in fast food enable restaurants to compete with retail stores, service sector employers, manufacturers, and others. To maintain their position, non-restaurant employers will raise their compensation rates.

The War for Talent is back!

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