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For employers, pressures for higher wages grow

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After Amazon Inc. announced Oct. 2 that it would raise its base pay for workers to $15 per hour, companies nationwide took notice, including Pennsylvania businesses with no direct connection to the warehousing and retail industries dominated by the online behemoth.

Observers note that companies already are scrambling to retain and recruit workers because of the increasingly tight labor market, where unemployment rates are hovering at or below 4 percent, levels not seen for years.

“Certainly, Amazon making this move captures people’s attention,” said Alex Baloga, president and CEO of the Pennsylvania Food Merchants Association, a Camp Hill-based trade association that represents convenience stores, supermarkets, independent grocers, wholesalers and consumer-product vendors.

But Baloga and other observers noted that most businesses didn’t need a prod from Amazon to be looking for ways to combat the tight labor market. Few companies routinely pay the Pennsylvania minimum wage of $7.25 per hour, which is also the federal minimum wage, they said. Most have to boost pay and benefits to lure new workers and to keep existing employees.

“We are seeing that all throughout,” Baloga said. “It is difficult to retain folks.”

His organization, as well as the Pennsylvania Chamber of Business and Industry, oppose efforts to raise the state minimum wage, arguing that today’s tight labor supply demonstrates that market forces can boost wages without government intervention.

Not everyone agrees.

While average pay has increased slightly in Pennsylvania, said Stephen Herzenberg of the Keystone Research Center, evidence shows that wages are lagging.

“Overall, the numbers still are not rising very quickly,” said Herzenberg, executive director of the Harrisburg-based public policy think tank.

Although there are “a lot of anecdotes” of pay getting better, he said, “That hasn’t yet translated into broad-based wage increases.”

Some seen lagging

In August, The Keystone Research Center released its “State of Working Pennsylvania 2018” that outlined studies on stagnant wages. The report notes that wages in the past decade have fallen for the bottom 60 percent of state workers, partly because of underemployment of people who have not found jobs of equal or better pay since losing jobs during and after the recession.

Another reason, Herzenberg said, is that many companies use non-compete clauses that hinder people in low-skill jobs from seeking slightly higher pay. He said non-compete clauses originally were intended to prevent highly skilled workers or sales executives from taking their knowledge to a competitor. To use them in low-skill jobs, he said, is an unfair limit on a worker’s ability to seek better jobs.

The Trump Administration has put in place policies that have hurt working families, he said. Nonetheless, President Trump had been on target in his rhetoric.

“President Trump got it right in 2016,” Herzenberg said. “Our economy has been increasingly rigged against hard-working families.”

Falling union membership means workers have less power to fight back, he said. And he noted that surrounding states have increased their minimum wages, leaving Pennsylvania behind. Both candidates for governor – Democrat Tom Wolf and Republican Scott Wagner – have advocated for a higher minimum wage.

Over the summer, Wolf announced an executive order giving all state workers and contractors a $12 minimum wage – up from what had been $10.20 – with the wage increasing every year to 2024 when it will be $15. The change only affects jobs under the governor’s jurisdiction.

Herzenberg said that he, too, watched with interest as Amazon announced its decision to increase its minimum wage to $15 per hour. But he thinks it was done for other political and social reasons, in addition to a tight labor market. The company had perfected the ability to “squeeze money out of state and local governments” and people were starting to question why subsidies were being offered to Amazon’s billionaire founder, Jeff Bezos, he said. The wage increase was a way to deflect from that increasing criticism, he said.

“The chickens were coming home to roost for Amazon,” Herzenberg said. “Some people had started to figure out that Amazon was starting to wear out its welcome.”

The wage increases were to go into effect Nov. 1. When making the announcement, Bezos said in a prepared statement that the company had listened to its critics and decided to take a lead on the wage issue. The company also said it would start advocating for an increase in the federal minimum wage. 

Amazon employs about 10,000 people in Pennsylvania, including at distribution centers in Lehigh, York and Cumberland counties.

Not just pay

Observers noted that there is no getting around that the competition for workers is fierce, with companies having to branch beyond pay to fill positions.

“While higher wages can be a strong selling point for job seekers, company leaders should expand their focus beyond salaries in an effort to maximize recruiting efforts,” said Glenn McFerran, district manager for Insperity, a national HR and business solutions firm with offices in Pittsburgh and Philadelphia. “Non-traditional benefits, such as flexible schedules and increased training opportunities, can be valuable tools to attract talent.”

Some companies also now offer benefits for part-time and seasonal workers, he said. And for smaller companies that cannot compete on pay, company culture and creative time-off policies can entice new talent, McFerran added.

John Longstreet, president and CEO of the Pennsylvania Restaurant and Lodging Association, said restaurants, in particular, have refined flexible scheduling and other incentives to keep workers happy. Some small businesses had hoped to offer lower-cost health care through so-called association health plans sanctioned by the federal government, but those efforts have stalled because of state rules limiting expansion of the plans in Pennsylvania, he said.

But the worker shortage has been so keen in the businesses his trade association represents that some restaurants have had to close sections – even with lines of customers – because they lack workers.

While it is frustrating for customers to see empty tables as they wait, he added, some restaurant owners have learned that it is better to give diners high-quality service rather than spread staff too thin. And it is not unusual for hotel managers to roll up their sleeves and prepare a room for a new guest, he said. Restaurants that cannot find enough chefs, meanwhile, might adjust menus to simple selections that can be made by people with little training or experience.

As far as wages and Amazon, he agrees that market forces are at work and that will be the best way for wages to adjust, rather than through a government-mandated increase. In the end, he added, good management is the best advice.

“Don’t lose the employees you have,” Longstreet said. “And the best way to not lose the employees you have is to take care of them.”

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