Industry Update
Opinion Article19 May 2021

Besides Higher Wages, What Else Can Businesses Do To Address Labor Shortages?

By Linchi Kwok, Associate Professor at The Collins College of Hospitality Management

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Last week, COVID-19 cases in the U.S. hit their lowest rate since September. Deaths were also at the lowest point since April last year. Moreover, close to 60% of adults in the U.S. have already received at least one dose of a vaccine. The Centers for Disease Control and Prevention (CDC) announced on May 13 that:

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  • People who are fully vaccinated no longer need to wear face covers or maintain a social distance in any setting unless they are required to do so by laws or specific guidelines.
  • Fully vaccinated people can also refrain from testing following a known exposure (with a few exceptions).

Some businesses, such as Starbucks, Costco, Trader Joe’s, Walmart, Sam’s Clubs, Universal Studios, and Disney parks in Florida, have decided to follow CDC’s new guidelines. Fully vaccinated people are no longer mandated to wear a mask in their establishments.

The U.S. economy is recovering, with highest job gains in the leisure sector

Under a much-improved situation, people are ready to travel and go out again, signaling the recovery of the U.S. economy. The U.S. economy is now operating at 89% of its pre-pandemic level.

Out of all industries, the leisure sector recorded the highest percentage growth of jobs in the 12-month period between March 2020 and March 2021 at 61.9%, significantly higher than retail, with the second-highest gain at 14.9%. Within the leisure sector, the noteworthy gains include:

  • Gambling & Amusements: 81%
  • Restaurants & Bars: 68%
  • Performing Arts & Spectator Sports: 31.9%
  • Accommodation: 29.2%
  • Museums: 6.7%

Using job postings on LinkedIn in February 2020 as a reference point, the recreation and travel industry reported the biggest decline in openings in June, at negative 60%. March 2021 was the turning point when the industry recorded a positive percent change in postings. There were 15-19% more postings in April/May of this year than in February 2020.

When everyone is hiring to meet growing demand and prepare for the summer, many are struggling to fill job openings. How bad is the current labor shortage situation?

A restaurant owner in New York City, for instance, posted a job listing for a host/hostess position at $30 an hour but received no response for two weeks. A year ago, the same restaurant would have received “hundreds and hundreds of resumes” already for the same position paying $20 an hour.

McDonald’s aims to hire 10,000 new employees in three months and plans to increase wages by 10% for over 36,500 employees in its 650 company-owned restaurants. The restaurant chain also encourages the owners and operators of its franchises to do the same.

McDonald’s was just one of the many businesses that recently boosted wages for their associates. Some also offer sign-on bonuses for new hires.

Besides higher wages, what else can be done?

When every company is offering a higher wage and even sign-on bonuses to new hires, businesses must do more to respond to the labor shortage challenge. In the short-term, I recommend businesses:

  • Call previous workers and offer them a raise if they return to work.
  • Ensure employees that they will work in a safe environment.
  • Offer paid internships to high-school and college students.
  • Present career advancement opportunities to the interns, new hires, and current employees, convincing them they have a future in the company.
  • Highlight training opportunities to the candidates striving to grow.
  • Redesign existing jobs with flexible schedules and part-timers.
  • Restructure the service process by introducing more easy-to-implement, self-service components.
  • Communicate with the customers clearly about the labor shortage issue, allowing them to appreciate the service they receive and feel more tolerant of slower service.
  • Use dynamic pricing strategies to smooth uneven demand.

For the long-term, I suggest businesses:

I am sure there are more remedies and creative ideas that can help businesses solve the labor shortage challenge. What other recommendations will you make? Please share your suggestions with us.

Note: This post was first published on MultiBriefs.com.

Linchi Kwok

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