Dominick Reuter
Sat, March 4, 2023
Walmart increasing its minimum wage to $14 per hour was followed by an avalanche of similar moves from other retailers.
Joe Raedle/Getty Images
As companies of all stripes tighten their budgets, retailers are still spending big on hourly workers.
Big hourly wage increases of the past three years are here to stay, and more are in the works.
Kroger is the latest to join other major brands like Walmart and Target in the "labor hoarding" war.
There's a quiet war being waged among America's largest retailers, and the winner might be the previously under-appreciated hourly worker.
Slower sales growth, rising interest rates, and increased uncertainty are compelling companies of all stripes to tighten their operations and hunt for cost savings.
Tech employers have shed more than 120,000 workers this year alone – per a count maintained by Layoffs.fyi – in order to boost profitability and satisfy investors, but the word coming out of retail C-suites this past earning season paints a strikingly different picture.
Retail executives are saying that the substantial investment in their front-line workforce of recent years is here to stay, and that any cost savings will have to be found elsewhere. Many are even doubling down with billions of dollars in commitments to further improve compensation, extending the ongoing trend of "labor hoarding" in the industry.
Labor hoarding is when an employer keeps workers they might otherwise cut in a downturn, since hiring and training replacements could lead to missed opportunity or market share when things start to improve.
And that's exactly what's happening here.
Supermarket giant Kroger announced Thursday it would spend $770 million on raising wages in 2023 after having previously spent $1.9 billion on hikes since 2018. CEO Rodney Mullen pointed out that the company's average hourly rate is now more than $18 following a 6% increase in 2022.
Costco, which came into the pandemic era already paying industry-leading wages, delivered three off-cycle wage increases in the past 15 months, CFO Richard Galanti said during that company's earnings call, also on Thursday.
"Competitive compensation continues to be table stakes," Best Buy CEO Corrie Barry said Thursday, adding that the electronics giant has raised hourly pay roughly 25% over the past three years. She too gave no suggestion that any of those costs would be rolled back as demand falls for expensive TVs and other high-tech products.
Indeed, Barry spoke about the key role front-line teams play in the success of the company.
"Sometimes I want very rapid fulfillment of my product — I want to pick up in store and have the confidence of grabbing that product. Sometimes I want a deeper, more immersive experience," she said of the brand's shoppers. "It's why we are investing more in our front line associates who are the ones who are right there, meeting the customer in the moment."
These companies have plenty of incentive to hoard all the labor they can, as the battle over labor translates directly to the larger war for market share.
"Customers also decide where to shop based on the freshness of product and the friendliness of associates. And that's part of the overall value equation." Kroger's Mullen said. "I really think it's important for you to look at all those together."
Kroger, Costco, and Best Buy join a list that previously included Walmart, Target, Home Depot, and Lowe's, who have expressed similar sentiments this earnings season.
In January Walmart announced it would increase its minimum wage from $12 to $14 per hour, bringing the US average hourly wage up to $17.50.
Then in February, Home Depot said it will spend $1 billion to increase wages for hourly workers, bringing its starting wage to at least $15 an hour nationwide. The company said it would pay commensurate raises to current employees.
Lowe's followed this week, reporting that employee compensation increased by $3 billion since 2018, and would grow by another $1 billion over the next three years.
And while Target did not announce a pay hike, the company said cuts to "the best team in retail" were off limits as the company hunts for $2 billion to $3 billion in operations cost savings over the next several years.
With two job openings per unemployed worker, staffing the front lines has become a zero-sum game for retailers who say they've learned hard lessons about how sales suffer when stores are short-handed.
To be sure, the pay is still comparatively low, the work often physically demanding, and the hours inconsistent, but these developments reflect a major change in the way retail employers think about their workforces.
It's not yet clear which company will get the edge in this battle, but it's workers who are poised to win in any case.
Kroger to spend $770 million more on employee pay and benefits this year amid ‘labor hoarding’ trend
Lauren Justice—Bloomberg via Getty Images
Steve Mollman
Fri, March 3, 2023
Last month we learned that Kroger has been texting and emailing former employees who had quit their jobs to ask them to come on back. Now the supermarket giant says it will spend $770 million more this year to raise hourly wages and improve health-care benefits for its workers.
Kroger made the announcement Thursday after surprising Wall Street with strong fourth-quarter results, partly a result of streamlining its supply chain to reduce costs.
Kroger isn’t the only retailer upping wages and benefits. Faced with the lowest unemployment rate in more than 50 years, Walmart, Home Depot, and others are also paying workers more.
The pay boosts are part of the “labor hoarding" trend, in which companies, afraid they’ll be unable to fill positions if workers leave, try harder to keep them.
And companies have reasons to be fearful. The latest jobs report showed the retail sector adding about 30,000 jobs in January. Nonfarm payrolls overall increased by 517,000, crushing the market estimate of 187,000, and wages posted solid gains as well. The leisure and hospitality sector alone added 128,000 jobs.
In other words, workers stocking shelves or helping customers in a Kroger or Home Depot have plenty of options if they decide to leave—and companies know it.
Home Depot said last month it’s spending $1 billion on wage increases for workers in North America. Walmart, the nation’s largest private employer, said in January it would raise its minimum wage for store employees from $12 to $14 an hour.
Of course, fears of a looming recession remain; interest rates and credit card debt in the U.S. are rising while savings dwindle amid high inflation; and many Americans are struggling to make their car payments. Headlines about mass layoffs at big-name firms, meanwhile, have been inescapable in recent months.
Those layoffs, however, have often been concentrated in the tech industry, where many companies over-hired to meet surging demand for their products and services during the pandemic. In January Amazon began firing 18,000 people, Microsoft let go of 10,000, and Google parent Alphabet slashed 12,000 jobs.
More broadly, “We are still in a jobs market where labor demand far outpaces supply, with 3 million fewer workers than before the pandemic,” Becky Frankiewicz, president of ManpowerGroup, the world’s third-largest staffing firm, told Fortune last month. “Pandemic paranoia has set in with employers who remember how hard it was to bring back workers.”
This story was originally featured on Fortune.com
As companies of all stripes tighten their budgets, retailers are still spending big on hourly workers.
Big hourly wage increases of the past three years are here to stay, and more are in the works.
Kroger is the latest to join other major brands like Walmart and Target in the "labor hoarding" war.
There's a quiet war being waged among America's largest retailers, and the winner might be the previously under-appreciated hourly worker.
Slower sales growth, rising interest rates, and increased uncertainty are compelling companies of all stripes to tighten their operations and hunt for cost savings.
Tech employers have shed more than 120,000 workers this year alone – per a count maintained by Layoffs.fyi – in order to boost profitability and satisfy investors, but the word coming out of retail C-suites this past earning season paints a strikingly different picture.
Retail executives are saying that the substantial investment in their front-line workforce of recent years is here to stay, and that any cost savings will have to be found elsewhere. Many are even doubling down with billions of dollars in commitments to further improve compensation, extending the ongoing trend of "labor hoarding" in the industry.
Labor hoarding is when an employer keeps workers they might otherwise cut in a downturn, since hiring and training replacements could lead to missed opportunity or market share when things start to improve.
And that's exactly what's happening here.
Supermarket giant Kroger announced Thursday it would spend $770 million on raising wages in 2023 after having previously spent $1.9 billion on hikes since 2018. CEO Rodney Mullen pointed out that the company's average hourly rate is now more than $18 following a 6% increase in 2022.
Costco, which came into the pandemic era already paying industry-leading wages, delivered three off-cycle wage increases in the past 15 months, CFO Richard Galanti said during that company's earnings call, also on Thursday.
"Competitive compensation continues to be table stakes," Best Buy CEO Corrie Barry said Thursday, adding that the electronics giant has raised hourly pay roughly 25% over the past three years. She too gave no suggestion that any of those costs would be rolled back as demand falls for expensive TVs and other high-tech products.
Indeed, Barry spoke about the key role front-line teams play in the success of the company.
"Sometimes I want very rapid fulfillment of my product — I want to pick up in store and have the confidence of grabbing that product. Sometimes I want a deeper, more immersive experience," she said of the brand's shoppers. "It's why we are investing more in our front line associates who are the ones who are right there, meeting the customer in the moment."
These companies have plenty of incentive to hoard all the labor they can, as the battle over labor translates directly to the larger war for market share.
"Customers also decide where to shop based on the freshness of product and the friendliness of associates. And that's part of the overall value equation." Kroger's Mullen said. "I really think it's important for you to look at all those together."
Kroger, Costco, and Best Buy join a list that previously included Walmart, Target, Home Depot, and Lowe's, who have expressed similar sentiments this earnings season.
In January Walmart announced it would increase its minimum wage from $12 to $14 per hour, bringing the US average hourly wage up to $17.50.
Then in February, Home Depot said it will spend $1 billion to increase wages for hourly workers, bringing its starting wage to at least $15 an hour nationwide. The company said it would pay commensurate raises to current employees.
Lowe's followed this week, reporting that employee compensation increased by $3 billion since 2018, and would grow by another $1 billion over the next three years.
And while Target did not announce a pay hike, the company said cuts to "the best team in retail" were off limits as the company hunts for $2 billion to $3 billion in operations cost savings over the next several years.
With two job openings per unemployed worker, staffing the front lines has become a zero-sum game for retailers who say they've learned hard lessons about how sales suffer when stores are short-handed.
To be sure, the pay is still comparatively low, the work often physically demanding, and the hours inconsistent, but these developments reflect a major change in the way retail employers think about their workforces.
It's not yet clear which company will get the edge in this battle, but it's workers who are poised to win in any case.
Kroger to spend $770 million more on employee pay and benefits this year amid ‘labor hoarding’ trend
Lauren Justice—Bloomberg via Getty Images
Steve Mollman
Fri, March 3, 2023
Last month we learned that Kroger has been texting and emailing former employees who had quit their jobs to ask them to come on back. Now the supermarket giant says it will spend $770 million more this year to raise hourly wages and improve health-care benefits for its workers.
Kroger made the announcement Thursday after surprising Wall Street with strong fourth-quarter results, partly a result of streamlining its supply chain to reduce costs.
Kroger isn’t the only retailer upping wages and benefits. Faced with the lowest unemployment rate in more than 50 years, Walmart, Home Depot, and others are also paying workers more.
The pay boosts are part of the “labor hoarding" trend, in which companies, afraid they’ll be unable to fill positions if workers leave, try harder to keep them.
And companies have reasons to be fearful. The latest jobs report showed the retail sector adding about 30,000 jobs in January. Nonfarm payrolls overall increased by 517,000, crushing the market estimate of 187,000, and wages posted solid gains as well. The leisure and hospitality sector alone added 128,000 jobs.
In other words, workers stocking shelves or helping customers in a Kroger or Home Depot have plenty of options if they decide to leave—and companies know it.
Home Depot said last month it’s spending $1 billion on wage increases for workers in North America. Walmart, the nation’s largest private employer, said in January it would raise its minimum wage for store employees from $12 to $14 an hour.
Of course, fears of a looming recession remain; interest rates and credit card debt in the U.S. are rising while savings dwindle amid high inflation; and many Americans are struggling to make their car payments. Headlines about mass layoffs at big-name firms, meanwhile, have been inescapable in recent months.
Those layoffs, however, have often been concentrated in the tech industry, where many companies over-hired to meet surging demand for their products and services during the pandemic. In January Amazon began firing 18,000 people, Microsoft let go of 10,000, and Google parent Alphabet slashed 12,000 jobs.
More broadly, “We are still in a jobs market where labor demand far outpaces supply, with 3 million fewer workers than before the pandemic,” Becky Frankiewicz, president of ManpowerGroup, the world’s third-largest staffing firm, told Fortune last month. “Pandemic paranoia has set in with employers who remember how hard it was to bring back workers.”
This story was originally featured on Fortune.com
No comments:
Post a Comment