Finding enough help to keep the doors open concerns businesses large and small, according to two surveys conducted by the Atlanta Fed.
The quality and availability of labor are by far the most pressing concerns cited by businesses large and small at the start of 2023, and combined they've been among their top two worries since 2018, according to surveys conducted by the Atlanta Fed.
issues other than labor—including inflation, monetary policy, costs, and supply chain—pale in comparison to concerns about having enough competent employees to do the work that keeps the doors open, according to responses by about 300 business leaders. These results were gathered in early December 2022 in the Special Questions Series of the Business Inflation Expectations survey, which is part of the Atlanta Fed's Inflation Project.
The nation's corporate financial leaders also listed labor as their No. 1 concern in a separate survey of chief financial officers (CFOs), though with a caveat: Inflation was tied with labor quality and availability. The CFO Survey showed labor had risen to a top position by the fourth quarter among respondents contacted in late November 2022, according to results reported in "Inflation, Monetary Policy, and the Real Economy" by John Graham of Duke University, Brent Meyer of the Atlanta Fed, and Sonya Ravindranath Waddell of the Richmond Fed.
The CFO Survey, released December 21, 2022, drills deeper than the Special Questions Series to interpret concerns about a labor shortage that include its impact on wages, as well as myriad other economic influences.
The report concludes that respondents haven't altered their employment plans for 2023 despite higher inflation. However, CFOs noted that not even the worker shortage will compel employers to raise wages enough to keep pace with cost-of-living increases related to higher inflation. "Many, if not most, workers will not see wage increases make up for the recent inflation," the report observed.
The gap between wage gains and inflation may reflect other concerns CFOs expressed over the course of 2022, which were considered in the report: "There has been a material deterioration in CFOs' outlook for the US economy and output growth over the past year. Moreover, relative to previous quarters, reported concerns over the health of the economy and own-firm demand are mounting…."
Regardless of these headwinds, employers did raise wages in 2022 in an effort to attract and retain workers. Cost-of-living adjustments factored into calculations of annual pay hikes, 57.7 percent of CFOs reported. Among the 22 percent of companies that issued only merit-based pay hikes, the raises were higher than normal—possibly in recognition of the tight labor market, the report observed. Merit pay increases last year averaged 4.3 percent versus 3.5 percent in 2021. These pay hikes are independent of other amenities businesses may offer employees, such as increased remote work or lower costs in corporate cafeterias.
A trade organization for restaurants and a 45-year-old car dealership offered their insights into concerns about the labor situation.
The Georgia Restaurant Association (GRA) found in its latest member survey that wage hikes of nearly 12 percent have not been enough to attract the number of workers needed to prepare and serve food and drink and clean up after customers, according to Karen Bremer, GRA president and chief executive officer. "We estimate 50,000 jobs could be filled in Georgia if there were more people who wanted to work in our industry," Bremer said.
Wage inflation is contributing to a collapse of restaurant profits to a rate of 2 percent or less from 4 percent to 6 percent, Bremer said. This isn't the first time Bremer's seen labor shortages in various positions, but this time the shortages are across the board.
We estimate 50,000 jobs could be filled in Georgia if there were more people who wanted to work in our industry.
— Karen Bremer, president and chief executive officer Georgia Restaurant Association
"I've been in the industry 49 years, in management," Bremer said. "In the '70s and '80s, there were dire straits of not enough managerial people. In 2019, labor was the biggest issue. Then in 2020, COVID was the biggest issue. Then it was inflation. Now labor has come back up as the biggest issue. Everybody is short-staffed."
In automotive sales and service, Juanita Baranco said the Baranco Automotive Group relies on extensive pre-employment screening in hopes of hiring workers who will stay with the firm and enable it to avoid a costly churn of employees. The company was one of Georgia's first Black-owned dealerships when it opened a Pontiac showroom and repair facility in 1978. It now has two dealerships with about 275 employees at Mercedes-Benz facilities in Atlanta and Covington, Louisiana, about an hour's drive north of New Orleans. Baranco is a former member of the Atlanta Fed's board of directors.
"We get the occasional millennial and after two weeks they walk out," Baranco said. "People are people. But if you make a good hire, and that's the point I want to stress—if you hire someone who has an aptitude for a job, maybe not all the skills, but an aptitude, and you show them opportunity for upward mobility, you have a good chance of coming up with a good employee."
David Pendered
Staff writer for Economy Matters