Buyers see wage pressure cooker
By Kathryn Belyea -- Purchasing, 7/13/2000 2:00:00 AM
Purchasing Magazine recently asked members of its business survey panel if their organizations are experiencing increased wage pressures due to tight labor markets. Their responses suggest that companies are being forced to offer both higher starting wages and more competitive wage increases, as well as fatter benefits packages, in order to attract new workers and to prevent existing staff from pursuing "new economy" opportunities. People remain in short supply; qualified personnel are even more rare, according to the survey.
Survey respondents report that salaried as well as hourly employees are asking for higher starting pay. "Our regional unemployment rate is 2.7%," says a Minnesota purchasing manager, "and we've had to raise starting pay 15%." A senior buyer in Pennsylvania says, "The competition to attract the best candidates to open positions has increased stated salary ranges." In the Mid-Atlantic region a buyer says, "We're paying premium hourly for semi-skilled jobs."
As starting wage rates escalate, longer-term employees also appear to be demanding higher pay. And if they're not obtaining better pay increases, many are jumping ship. For example, the VP for an Indiana engineering company notes, "We have 2.4% unemployment. We can't find machine operators at our present wage rates and have to increase wages for present employees just to hold them." A Minnesota-based PM puts it succinctly, "Even the trainable unskilled come at a premium."
The talent deficit
Finding qualified personnel is especially difficult, buyers say. A senior buyer in Florida remarks that, "It's difficult to find and keep qualified operators in the factory." The VP for a Montana manufacturer complains that, "People seem less qualified, but they want more money." A senior buyer in Seattle agrees: "Qualified people are at a premium, and we are paying more." Purchasing departments are not exempt from this dearth of proficient personnel. "It took me nearly four months to find a qualified buyer who would accept the salary range I could pay," observes a West Coast purchasing pro. "All the other applicants were either not qualified or required too high a salary." Other respondents express similar sentiments.
It appears that companies with union contracts are experiencing the greatest wage stability at present. "We have two years left on our current union contract," explains an Ohio-based purchasing director, citing no increased wage pressure. In Pennsylvania as well, a purchasing director reports, "Our union contract expires on September 2000." In the south, a buyer offers, "Firm labor contract signed June 1999 for 42 months."
Some unionized employees, however, are chafing at the idea of being left behind as wage scales escalate. When new contracts are in the offing, some purchasing pros observe that union negotiators appear to be pushing for greater increases and/or better benefits. "We're in the midst of contract negotiations with our labor union," says a Northeast purchasing pro, "and there is dissatisfaction with the proposed wage offer." In Pennsylvania a purchasing agent says, "Union employees are looking for increases in pay and benefits."
In some cases, union employees want increased benefits as opposed to wage increases. In Wisconsin, for example, a purchasing director whose company is currently conducting union negotiations says, "Future health and welfare benefits have become the key focus for both sides. Wage increases are secondary because plenty of overtime is available to increase gross wages."
Temp business booms
In attempts to buffer inadequately staffed production lines and reduce wage pressures, some companies are looking to temp agencies. "We've hired 40 temps to bridge the workload gap," says a Kansas purchasing agent. A Michigan buyer says, "We use temporary workers to compliment our core work force. That keeps the pressure down." In Indiana, a purchasing agent notes, "Current unemployment rate in our area is under 3%. We're using a temporary-to-permanent program to try to keep workers."
But temp wages and salaries in some cases are also on the rise, and temporary help does not always come with the experience desired. "It's difficult to get temp help for the summer at our current rates," complains a purchasing manager for a California-based manufacturer. A buyer in Michigan says, "All shop employees are hired through temp agencies. We can't get the best people."
Cherrypicking escalates
In their hunts for qualified personnel, plenty of organizations are attempting to woo employees from other companies. A Wisconsin steel buyer says, "It takes wages greater than our competitors to attract employees. The current labor market has us drawing from employed prospects as opposed to unemployed." A Midwestern PM goes more to the point when he says, "About the only way to get skilled workers is to hire them away from other companies for more money." Those unable to compete with higher pay continue to lose valued employees. "We're tier one to the automotive industry," says one Midwestern PM. "The OEMs continually raid talent in many areas, especially engineering." One buyer laments that his company is not taking appropriate steps to meet the wage-pressure problem head on. "Our organization has chosen to ignore it," he says, "and not keep up with rising labor costs. The end result is that we'll lose valuable employees to firms paying higher wages."
Among survey respondents who say their companies are neither unionized nor experiencing rising wage pressures, many suggest that they're already paying at the top end of their local pay scales. "We drive the local market in our area," says a South Carolina PM, "paying typically higher wages and increased benefits. This is our company target." Another Southern PM says, "Annual increases to the hourly workforce preclude any short term pressures." In Minnesota, a PM notes, "We have a very competitive wage structure. We hire very skilled people, and train people to our standards." A North Dakota purchasing manager says, "We have always offered good wages because we feel without our employees we would not be where we are today. They are very valuable to our company, and we express it."
Now Playing: 