How does today’s runaway inflation — which represents the single-largest decrease in real buying power since the early 1980s, with consumer goods retailing for almost 10 percent more than they were at this point last year — impact the hiring outlook for manufacturing and logistics employers?
From the latest trends in the job market to emerging salary pressure, here’s what you need to know.
inflation and the job market
The underlying drivers of inflation — and the resulting price increases — are notoriously difficult to untangle. What’s clear at the moment, though, is that ongoing supply chain disruption, climbing energy prices, unforseen demand spikes and geopolitical instability have been among the contributing forces.
Causes aside, there are also some things that are undeniably novel about the present moment — for example, the fact that price increases today are more heavily weighted toward goods than services. (Of course, that’s something many manufacturers may be all too aware of.) But this weighting represents a significant reversal of the inflationary trends seen prior to the pandemic, when price hikes were more closely associated with services than goods.
Meanwhile, the hiring market continues to surge: An estimated 372,000 jobs were created in June, for example, with analysts calling out “notable gains'' in food manufacturing and related fields, which could impact manufacturing and logistics companies alike down the line. All told, manufacturing accounted for 29,000 of the net job growth in June, while adjacent fields like transportation and warehousing contributed an additional 35,000.
This is largely in keeping with the broader trends seen in previous months, in which job openings have increased in transportation, warehousing, utilities, nondurable goods manufacturing and durable goods manufacturing.
Unfortunately, however, that doesn’t change the core dynamics of the manufacturing and logistics workforces. In both cases, talent seems increasingly hard to come by, with nine out of 10 manufacturers currently reporting labor gaps.
All told, it’s a strange, inconsistent picture of job growth alongside talent shortages. But it might help to explain why Fed Chair Jerome Powell recently characterized the labor market as "unsustainably hot.” A period of cooling could be imminent.
inflation and wage pressure
Turning from the job market to earnings, how is inflation playing out in terms of compensation? Is its usual corollary — so-called “wage inflation” — taking effect?
Broadly speaking, the answer is yes. Average compensation is going up. In June alone, hourly pay climbed to an average of $32.08 for all workers, a 5.1 percent increase from the average in June 2021. In the past year, what’s more, workers in fields like leisure and hospitality have seen their hourly earnings grow faster than at any point in decades, according to research.
Of course, in the context of rising gasoline, shelter and food costs, that’s an especially good thing, and it shouldn’t be particularly surprising.
This high-level trend — upward pressure on compensation levels — certainly has not been lost on manufacturing and logistics employers. In fact, one SHRM survey found that manufacturers are considerably more concerned about the downstream impacts of inflation than their counterparts in most other industries.
Despite that, however, there’s also evidence that wages may be stagnating at many manufacturing and logistics employers, which suggests it may be time to recalibrate wages for manufacturing and logistics employers across the board. The urgency for doing so becomes clear when you consider the following factors:
- As mentioned earlier, both the manufacturing and logistics workforces are plagued by ongoing talent shortages (to the tune of something like 2.5 million workers in manufacturing alone).
- Most manufacturing and logistics employers are struggling simply to hire and retain the essential talent they need.
It’s also worth calling attention to the demonstrated upside — and documented ROI — associated with increasing wages for manufacturing and logistics employers. Check out these bite-sized case studies for proof.
As for the extent to which wages are going to increase among manufacturing and logistics employers in the near-term future, only time will tell.
key takeaways — and what’s next
The net impact of inflation on hiring is something of a paradox, as we have seen. A few key takeaways in summary:
- While the job market remains hot, sourcing qualified talent isn’t getting any easier for manufacturing and logistics employers.
- In light of existing workforce challenges, manufacturing and logistics employers would be wise to recalibrate their compensation offerings to ensure they’re getting it right.
In this context, it stands to reason that organizations that act now to strategically recalibrate wages may well gain a competitive advantage. Get in touch with Randstad to learn how we can help your organization not only stay ahead of the latest economic trends, but leverage them for maximum benefit.