The Retail Holiday Hiring Headache

By some accounts, the 2018 holiday season is going to be a bang-up year for retailers. Unemployment is down and consumer confidence is up. Holiday sales for U.S. retailers are expected to increase 4.8 percent this year, according to the National Retail Federation (NRF) — well above the 3.9 percent increase experienced over the past five years, though slower that the 5.3 percent growth seen by the retail market one year ago.

All signs point to a very merry Christmas for retailers.

Perhaps unsurprisingly, reports of a very active holiday spending season has inspired retailers toward an active preseason hiring spree. Macy’s is looking to hire 80,000 workers and Target wants to hire over 120,000. The NRF expects seasonal employment in the retail sector to reach between 585,000 and 650,000 jobs.

Will all those jobs get filled, though? That is an open question — U.S. unemployment is at record lows, and retailers have already begun reporting difficulty finding workers, despite the early jump many tried to get on holiday season hiring. Hiring, however, was already going to be challenge in the segment.

Amazon also turned up the pressure by suddenly raising its employees’ wages, turning a holiday-season hiring problem into possibly a new year-round worry for retailers trying to retain workers.

Demand Outstrips Supply

As early as September, it was already apparent that retail was having a hiring issue, namely that there were more jobs than workers.

According to the Bureau of Labor Statistics, between March and June, there were more jobs open in the retail segment than there were people hired to fill them. In addition, data from LinkedIn has suggested that cities such as Seattle and New York have a dearth of workers with retail skills. To attract potential workers, retailers are rolling out perks like paid time off (PTO) for part-time employees, along with higher wages. Retailers are also hosting “recruiting marathons” to help hire thousands of people.

JCPenney and Kohl’s started hiring seasonal holiday workers in June. Macy’s is expanding the perks and benefits it offers to seasonal workers.

However, the hiring is not limited to retailers. Delivery carriers, such as FedEx and UPS, are also on the hunt for workers. FedEx is looking to add 55,000 seasonal workers, which is 5,000 more than 2017. UPS is looking for nearly double as many workers: 100,000 personnel, which also represents an increase of 5,000 workers from the prior year.

Raising The Bar On Minimum Wage

To keep things interesting in an already tightening labor market, Amazon announced last week that it will raise the minimum wage to $15 an hour for its United States employees. The raises will apply to part-time workers and those hired through temporary agencies.

The company said it would also lobby for Washington to raise the federal minimum wage, which has been set at $7.25 for almost a decade. The new wages will apply to more than 250,000 Amazon employees, including those at the grocery chain Whole Foods, and the 100,000 seasonal employees it plans to hire for the holiday season. It goes into effect on Nov. 1.

“We listened to our critics, thought hard about what we wanted to do and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

The change comes as the average wage for retail workers — pushed by lower supply — had already been creeping up. The average wage for retail sales workers across the U.S. is $13.20 an hour, according to federal data. For all retail workers, including salespeople, cashiers and supervisors, the average wage is $18.85.

Some of Amazon’s competitors have already gotten to the $15 mark, though — or near it. Last year, Target announced it would raise minimum pay to $15 an hour by 2020, and Costco raised its to $14 an hour. Walmart also announced a tick-up in its wages at the outset of 2018 to $11 for starting part-time wages. That was Amazon’s starting rate as well … until last week. It remains to be seen how Walmart, the nation’s largest private employer, will respond to Amazon’s announcement.

“At the moment in the United States, unemployment is pretty low, and Amazon may be struggling to recruit and retain employees,” said Alan Manning, an economics professor at the London School of Economics, who has studied minimum wage policies. “It’s also a bit of good publicity.”

For the holiday season, the risk is great and the stakes are high. However, Amazon’s rapid onset in the raising of its minimum wages has ensured that it will keep its competitors busy into 2019. The latest front in the retail wars may be for competent employees — a development that is probably to the good of workers, but not to retailers’ margins.

It also looks like the first big battle will be happening just in time for the holidays. Jingle all the way.