Labour pains: why the US is facing a blue-collar shortfall

US retail giant Walmart has just given a pay rise to its 8000 truck drivers, and they are now making $87,500 a year. That stacks up well given that the truckers on average earn about $53,000 for national routes, according to March 2018 figures by the American Trucking Association (ATA).

The company is also trying to hire about 900 new truck drivers. Why? Partly in anticipation of its own growth plans but also partly due to a larger trends in the trucking industry: namely, that the US will be short of 175,000 truck drivers by 2026, according to the ATA.

Feeling blue

The trucking industry illustrates the US’s severe shortage of blue-collar workers. In general, companies are now having a tougher time finding blue-collar workers than white-collar, according to US analyst the Conference Board. It forecasts that growing blue-collar labour shortages will continue in 2019 and beyond. While the pool of blue-collar workers is shrinking, demand for their services has continuously grown since the 2008 financial crisis. 

There are several reasons for this, including converging demographic and educational trends and a relatively strong US economy, says the analyst. The US population has become more educated, while the Baby Boomer generation, a segment of the workforce that once held many blue-collar jobs, continue to retire.

“Companies must realise that the talent shortage is not a blip on the radar,” says Alan Fluhrer, a US-based recruitment specialist. “It has been coming for more than 20 years, and will continue for a long time.”

A range of solutions

The US has enjoyed a robust job market for many years, and the national unemployment rate currently hovers at just under 4%. In response, companies are turning to a number of solutions including, as can be seen by Walmart, higher salaries. Other options are collaborative PPPs, apprentice programmes and workplaces that have been made more attractive with added amenities.

Softer approaches include a focus on an employee-friendly hiring process, and, above all, a willingness to let go of preconceived notions about the perfect hire. 

“Companies need to hire with a more open mind,” says Mr Fluhrer. “This means that companies, instead of looking for a person who meets 10 out of 10 skills, should look instead for a person that meets five or six or seven.” 

The recruiting process is also key, he adds, saying: “This includes good recruiting teams, good employee referral programmes and a culture that everyone in the company is responsible for recruiting.”

Besides attracting new employees these measures can also reduce employee turnover, which is the flipside of the scarce labour problem. Mr Fluhrer tells of how one client, a bank, cut turnover from 22% to 5% after implementing some of these best practices. Another, a real estate brokerage, took its turnover of brokers from approximately 80% to 5%, he adds.

New models

The US labour shortage is so severe, however, that friendly onboarding efforts are falling short. Companies are experimenting with new labour and operating models to attract employees. Flexible working hours and work-at-home arrangements are now widely accepted by many companies.

Others are trying out PPPs to recruit staff. Prologis, a global owner and developer of industrial warehouses, launched its Prologis Community Workforce Initiative in 2018, which collaborates with local workforce programmes to provide mentorship, skills training and internships for students interested in pursuing careers in logistics, distribution and transportation. In December 2018 it opened its second centre under this initiative, partnering with the Miami-Dade County Public Schools in Florida to launch the Prologis Trade and Logistics Lab. The lab will be housed at a local high school, offering a four-year programme for the students, who will be matched with employers in trade internships after their junior year. 

“Connecting with organisations such as Miami-Dade County Public Schools allows us to build a pipeline of talented workers for the future,” says Edward Nekritz, chief legal officer for Prologis.

Apprenticeship programmes, never particularly popular in the US compared with some other countries, are also on the rise. One large boost came in 2018 from fast-food chain McDonald’s, when it announced it would invest $150m in expanding its apprenticeship programme.

The growth of these programmes can be seen among smaller companies as well.

All Clear Plumbing of South Carolina has an in-house apprenticeship programme it set up using resources from the state government and the US Department of Labor, says managing partner Anja Smith. “We are an example of a small business building our own workforce in the construction industry,” she adds. The employees in the apprenticeship programme are paid full-time and have benefits. They also receive on-the-job training as well as paid tuition and books for online classes, says Ms Smith.

Courting workers

In areas with newer logistics and distribution facilities, it has become harder to recognise the modern warehouse. It may have a gym and a larger lounge areas. Some even feature basketball courts. Desperate for workers, warehouse owners are adding amenities that might seem more at home in an office building, according to a report from real estate company Colliers International.

To be sure, such offerings are not the norm among fulfilment centres. They are seen mainly in locations were labour is scarce and the demand for logistics services is great, such as in urban infill areas. Naturally these facilities are also raising wages to remain competitive, and these overall rising costs have the potential to significantly erode company margins. According to commercial real estate services organisation Colliers, a building typically accounts for between 4% and 6% of a company’s supply chain costs, while labour is significantly higher. So far, however, the return on investment makes sense when the company considers the cost of replacing its labour.

Interestingly, rising labour costs are also prompting owners to reconsider their site-selection decisions. Before labour costs became so high, location decisions tended to rest on transportation costs and the proximity of major markets. Now, the trend for companies to locate giant distribution centres in tertiary markets shows that labour costs are becoming a factor.