Labor shortage

Business operators are facing what some are calling a labor shortage and struggling to find solutions to maintain employees and sustain profits.

As businesses in Columbia County emerge from the COVID-19 pandemic, many are facing the challenge of a limited workforce. The labor shortage isn’t new. Labor shortage has been a consistent issue for many employers across the state of Oregon and the nation, according the economists.

Nationally, businesses across industries are experiencing labor shortages as employees experience low wages. This is not a coincidence, according to Erik Knoder, a regional economist with the Oregon Employment Department.

From 2010 through 2020 the average wage — including full and part-time jobs — increased 35% in Benton County, 36% in Clatsop County, 39% in Columbia County, 41% in Lincoln County, and 44% in Tillamook County.

“That seems great, until we remember that inflation increased also during that time.” Knoder wrote in a recent guest article for The Chronicle.

On May 18, the Oregon Employment Department announced that hiring in May ground to a virtual standstill, with the unemployment rate unchanged at 6%. The lack of job gains was striking, and part of a national trend.

Unemployment benefits blamed

Some business owners and associations like the Oregon Restaurant and Lodging Association (ORLA) blame the labor shortage on hefty unemployment insurance benefits from the government.

“It is clear the workforce challenges the hospitality industry is currently experiencing includes the enhanced unemployment benefits that incentivize a ‘wait it out’ mentality,” Jason Brandt, President & CEO of ORLA said in a statement to The Chronicle.

As the state emerges from the pandemic and reopens under Gov. Brown’s executive order that took effect June 30, Brandt and businesses collectively that the Chronicle spoke with hope employment will pick up.

“We look forward to working with the Oregon Employment Department to determine what changes make sense to continue providing a safety net for Oregonians who are unable to work due to legitimate COVID circumstance while also acknowledging changes to the rules are necessary given the wide availability of vaccinations readily available to all Oregonians 16 and older,” Brandt said. “We know we can protect those who need benefits while also adjusting our COVID scenarios currently resulting in eligibility to encourage a return to work when and where it makes sense for the individual and our industry employers.”

In St. Helens, Plymouth Pub, 298 S 1st St, owner Brad Rakes said the shortage he is experiencing is largely due to COVID-19 restrictions.

“We've lost two cooks in the last month because they're tired of wearing a mask at work. It's hot, it's high pressure, and wearing that mask for eight hours in that heat, with all the fire and oil, it’s brutal … And I think that's one of the reasons why we can't get help in the kitchen because it's hot back there and nobody wants to wear a mask.” 

Some businesses—Amazon, McMenamins, and the Chinook Winds Resort Casino, for instance—are offering $1,000 signing bonuses to new employees, but smaller businesses can’t swing an incentive that big.

“I can’t do what some places do. We’re a small business. It’s not like we’re Red Robin or McMenamins that can throw out $1,000 sign-up bonuses. We’re trying to give the kitchen help more [wages], but also food cost is going up,” Rakes explained. “Chicken prices are through the roof right now.”

According to a U.S. Foods report, frozen chicken wing inventory is at the lowest levels since 2012, and fresh jumbo wings, jumbo tenders and boneless thigh meat prices are at “record highs.” But their report also notes that the price rocketing has plateaued this week, and in some places, begun to decline.

Rakes said he is currently operating as the manager and the cook multiple times a week, and for two days in June, they closed due to a lack of staff. “One of my cooks is on vacation, and we don’t have the bodies to be open seven days.”

Aggressive hiring tactics

Northwest businesses like Burgerville are turning to aggressive hiring tactics, according to Burgerville Director of Strategic Initiatives Hillary Barbour.

“On the food side, I’m really happy to report that because of our super hyperlocal supply chain we haven’t had any of the food shortages,” Barbour said. “However, the restaurant industry has been hit among the hardest by the pandemic. We are definitely experiencing the labor shortages and the challenges that come along with that.”

To combat the restaurant chain’s gap in labor, Barbour said Burgerville has been “trying to meet the talent where they are.” A strategy which includes attending virtual job fairs (they hope to be in-person soon), offering referral bonuses to current employees who get a friend to apply and work for the company, hiring advertisements on social media, and — Barbour said she was particularly excited about this — getting on TikTok.

Barbour said another asset that Burgerville uses to beat out competing restaurants is wages.

“We’re always ahead of minimum wage increases in states,” Barbour explained. “We try to keep average pay ahead of and above the minimum wage.”

Burgerville’s starting wages in Oregon and Washington are currently $14.25 per hour. Burgerville unionized employees held a strike in 2019 seeking increased wages by $1 per hour, which Burgerville  agreed do.

Larger regional businesses, such as Amazon, McMenamins Restaurants, and the Lincoln City Chinook Winds Resort Casino, for instance — are offering $1,000 signing bonuses to new employees, but smaller businesses can’t swing an incentive that big.

“I can’t do what some places do,” Rakes said. ‘We’re a small business. It’s not like we’re Red Robin or McMenamins that can throw out $1,000 sign-up bonuses. We’re trying to give the kitchen help more [wages], but also food cost is going up,” Rakes explained.

The labor shortage was so severe this past month, Rakes said he was forced to close his business for two days.

Childcare is a barrier

While considering the labor shortage, Brandt also noticed another angle to this issue — the closure and shortage of childcare facilities and lingering fear surrounding COVID-19.

“The federal unemployment boost is not the only issue. We must also acknowledge the severe shortage in childcare facilities across Oregon as well as the ongoing fear at play in taking on a job requiring public facing interactions,” he added.

Mckenzie Norris, a server at Plymouth Pub, also works a second job across the street at Running Dogs Brewery. She has a child that is cared for by her family while she is working.

“All of my income basically is the tips, since we just make minimum serving,” Norris said, “So I count on tips and it’s kind of hard, especially on weekdays when it’s a little bit slower and you don’t get as much. So, I had to pick up a second job just to make up a little bit of that.”

The minimum wage in standard Oregon counties like Columbia is currently $12.75 an hour after the latest boost that took effect July 1.

Norris estimated that she makes between $25 and $30 an hour, with tips.

“It’s pretty good most of the time, but there’s days when it’s pretty slow and we don’t get as much,” she said.

Stories like Norris’ are what point Knoder to believe labor and wage are indelibly tied together.

“I would be surprised if Oregon’s, or any state’s, minimum wage was a factor in reducing the supply of labor. A minimum wage should, if anything, work to increase the supply of labor for those jobs affected by it,” Knoder told The Chronicle. “Think of it this way—imagine the minimum wage was $100/hour. Don’t you think that even more people would want a job paying minimum wage if it was $100 per hour?”

An economist’s perspective

 So, why can’t employers just hike their wages? The pandemic combined with food shortages and other market disruptions made for a perfect labor shortage storm, according to Knoder.

“Conventional economic theory states that businesses can always hire more people, if they offer a higher wage. There can be some short term reasons why this won’t always be the case. It takes time to train people, or there could be a disaster, such as the pandemic that interrupts the normal market process. It can also take time for businesses to discover what wage they need to pay to get enough employees,” Knoder explained. “I think what our labor market is experiencing is some short term disruptions, including enhanced UI (unemployment Insurance) benefits, pandemic concerns by workers, and other factors.”

The State of Oregon Employment Department reported in April that UI benefits overall were helping the state’s economic recovery, and only harming the labor market temporarily.

“Total personal income in Oregon today is about 15% higher than before the pandemic. The primary reason is the strong federal fiscal policy response to the pandemic,” the report said. “The recovery rebates and enhanced unemployment insurance benefits have each added $12 billion to personal income in Oregon. This income support is the primary reason why the recovery and overall economic outlook is so bright. Even so, a stronger safety net where incomes are higher today than pre-COVID can reduce labor force participation in the short term for some workers. To the extent this is happening today, it is temporary.”

The collision of abundant jobs and workers creates a tight market, Knoder said. Typically, in a recession, job openings become scarce and the ranks of the unemployed swell. However, our current market is tighter than we think, per Knoder’s research.

“Oregon had a pretty tight labor market in 2018 and especially 2019. Now that the economy is opening again after the pandemic, we are getting back to the new normal of a tighter labor market than many business owners are really used to,” he explained. 

Reopening

Knoder’s economic assessment aligns with the hopes of business owners across Oregon — that reopening will bring business, and job applicants in tow.

Marked by Gov. Kate Brown’s June 30 set date, Oregon is officially reopened, though federal mandates still remain, and cities are using incentives to help rebuild their economies. For example, over the 4th of July weekend, Portland offered free public transportation —an effort to encourage outings to shops, restaurants and bars.

In St. Helens, Communications Director Crystal King said The City of St. Helens is focused on long-term business recovery strategy through local investments.

“One business related effort we are currently working on is partnering to rebuild the St. Helens Main Street Alliance,” she said.

As the economy takes a new shape — post-pandemic restrictions — Knoder said the labor shortage, as it appears to be, will likely shift.

“Labor demand and supply curves shift all the time. It’s just that there now seems to be a larger, more noticeable shift back in supply. And many of the reasons are probably related to the pandemic, including, but not limited to enhanced unemployment benefits,” he said. “As we recover from the pandemic the labor supply will probably shift outward some. It is highly unlikely that there is a true shortage of people who are able to work as food servers, hotel clerks, housekeepers, cashiers, etc.”

Employees seeking work and employers looking for staff, can find hiring options at www.worksourceoregon.org

 

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