Supply chains around the country are in great need of warehouse and transportation workers. Just last month I noted that warehouse labor productivity was hindered extensively by COVID-19 and that 80 percent of ARC’s warehouse survey respondents anticipate an increase of order throughput volumes in 2021. Furthermore, COVID-19 exacerbated the existing shift from retail store purchases to e-commerce transactions, with a 32 percent increase in 2020 US e-commerce sales, according to the US Census Bureau. Much of this e-commerce business may revert back to retail stores, but much of it is likely to remain e-commerce as well. This is an important point because e-commerce order fulfillment is typically much more labor intensive than traditional replenishment operations, and is therefore placing burdens on logistics functions across organizations. Here are a few more data points supporting the ongoing labor needs of warehousing and transportation operations. These developments of employer needs can translate into greater bargaining power and compensation for workers.
Logistics Real Estate Growth
Jones Lang LaSalle (JLL), the real estate professional services firm, released new research based on a survey of 720 logistics experts in 43 countries. This study predicts that demand for logistics space (warehousing and distribution facilities) will continue to intensify over the next three years. JLL also stated that e-commerce was the overall standout performer in the logistics sector, marking the highest year-on-year growth take-up by any occupier group globally. Furthermore, 90 percent of respondents to JLL’s survey agree or strongly agree that investing in automation and robotics is the clear option for improving supply chains in the future. To me, this indicates that the labor shortage is seen as a long-term constraint to business. Furthermore, adoption of robotics and automation can replace the need for some labor, but will also shift the routines of workers in the warehouse toward greater use of modern technology and equipment, likely viewed as a positive for many employees.
Why Labor Constraints with 5.9 Percent Unemployment Rate?
In 2019 I wrote The Warehouse Labor Gap is Unsustainable. Warehouse labor constraints were acute at that time, but the overall US unemployment rate was at a historical low of 3.8 percent. Today labor constraints continue to burden fulfillment operations even with slack in the broader labor market. Why is that? Are the difficulties of attracting new warehouse labor and retaining existing workers a longer-term, structural concern that is not related to the overall unemployment rate? I believe it is certainly more complex than labor slack.
The Conference Board published a report in May titled “Labor Shortages are Making a Comeback”. In that report the author, Gad Levanon, noted the apparent disconnect between high unemployment rates and labor shortages in many industries. Recruiting and retention difficulties were mentioned as more pronounced in blue-collar and manual service jobs. The author further notes that demand for these workers is growing rapidly while labor supply is low. Furthermore, workers in these positions often face high infection risk (COVID-19) and many may also be benefiting from the temporary elevated unemployment benefits that can serve as a short-term disincentive to obtain work.
Concurrently, there are also indications that broad-based inflation is taking hold in the US. Although the inflation may be “transitory,” there is great uncertainty as to the degree or time frame. Put differently, wage inflation beyond general inflation is a purchasing power gain to the worker.
The Bureau of Labor Statistics (bls.gov) publishes an employment cost index. The June 2021 Index for wages and salaries shows a wage increase of 3.2 percent for 12 months ending in June. However, the wage increase for the transportation and material moving occupational group was up 4.2 percent. So these data indicate that logistics job compensation is increasing more rapidly than the average. The US Bureau of Labor Statistics (BLS) employment report does not publish an occupation category that holistically captures warehouse and fulfillment jobs. However, the BLS does provide employment data on industries, with the warehousing and storage subsector (logistics service providers) being the best substitute for the occupation. The June report showed a 14,000 worker increase for the month. Finally, a separate table in the same BLS report shows that employment in transportation and material moving occupations has increased from a June 2020 reading of 9.9 million workers to 11.3 million in June 2021, representing an increase of over 14 percent in one year. There is certainly a need for help. Maybe its worth taking a closer look?