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Gaming the system: Are Utah businesses or government to blame for labor shortage?

What is the labor shortage? How does it affect you? What can be done about it?

(Photos by Salt Lake Tribune journalists. Illustration by Chris Samuels | The Salt Lake Tribune) A collection of help wanted and now hiring signs across Salt Lake County.

This story is part of The Salt Lake Tribune’s ongoing commitment to identify solutions to Utah’s biggest challenges through the work of the Innovation Lab.

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If you visit your neighborhood Arctic Circle, you can grab a double cheeseburger, fries and a drink for $6.99.

Or you could throw on an apron and make $12 an hour selling a combo meal to the next person in line.

“We’re to the point where I’m trying to cut out the interview process,” said Arctic Circle President Kasey Christensen. “Just show up and if you’ve got a heartbeat and you can work, well, you’ve got a job.”

Even with that open-door hiring policy, the Utah-based restaurant chain struggles to fill its many vacant positions, leading to closed dining rooms, long waits and sometimes frustrated customers.

The labor shortage isn’t just hitting fast-food restaurants. In interviews with dozens of companies, economists and industry associations, this much is clear: It’s a problem that touches every corner of the economy — hotels with fewer rooms, unavailable high-demand Christmas gifts, and delays in delivering lifesaving medical devices for stroke victims.

“What we’re experiencing touches everyone,” said Honeyville Foods Vice President Johnny Ferry. “Whether that’s paying more at the gas pump, more in rent, more to put food on the table. Nobody is immune.”

Much of the public debate about the cause of the labor shortage breaks into one of two sound-bite camps: blaming businesses or blaming government.

“There are so many issues interconnected in this story,” said Willy Shih, professor of economics at Harvard University, “that it’s an absolute mess to try and untangle.”

Yet experts agreed that untangle we must — if we wish to get to real solutions to the rising costs for businesses and consumers. Untangling means tackling head-on the myths and legends around the labor shortage.

(Trent Nelson | The Salt Lake Tribune) Workers at Honeyville, Inc., in Ogden, on Thursday, Dec. 2, 2021.

Myth #1: Businesses just need to pay better

From strict economic theory, this isn’t exactly a myth.

“If there are jobs on the market and people aren’t taking them,” said Alisa Tazhitdinova, an economics professor at the University of California, Santa Barbara, “their time is worth more to them than what the job offers.”

Yet Utah businesses are paying more and still feeling the crunch from a tight job market.

Wages in Salt Lake and Weber counties rose by roughly 4% from March 2020 to March 2021 and by 7.4% in Utah County (the most recent data available). All the companies interviewed for this article have raised starting wages since March 2021.

Ferry, the executive at Honeyville, a Utah producer of commercial food products, notes that his company has boosted wages for starting factory line employees in their manufacturing facilities by more than 50%.

“We’re talking $12 pre-COVID,” he said, “to upward of $16 or $18 an hour now to attract the same worker.”

From his office window off 12th Street in Ogden, Ferry can see his competitors. “Not because we’re in the same industry, but because we’re trying to attract the same employee. Dollars are not enough. We have to get creative about how we attract an employee to come here instead of to the competitor across the street.”

Nate Seegert, a finance professor at the University of Utah, agrees.

“Businesses are trying to figure out how to make these jobs more attractive,” he said. “Pay is part of that, but it’s not the whole picture.”

Seegert pointed to startups, which generally pay less and demand more of their employees than established companies, “but they also have slides going from one floor to the next and pinball machines and game rooms.”

All of the companies interviewed for this article had adopted innovative benefits to attract and keep talent.

Those benefits vary widely, though, depending on the size and revenue of the company. While a major tech company like Provo-based Qualtrics can offer an on-site gym, quarterly bonuses and free daily meals, Arctic Circle relies more on gift cards to reward employee loyalty.

The competition for employees is wrapped up in other factors — global supply issues, inflation and a cultural shift in how we think about work and the consumption of goods and services.

Harvard’s Shih said it’s easier to think of the supply chain in terms of congestion. “When you have a crowd or traffic jam, everything goes less efficiently.”

The pandemic slowed production and transportation, supplies piled up at docks, leaving ships unable to unload. Everything backed up.

Ferry outlined a similar process at the consumer end of the supply chain. “The pandemic made people buy more food to prepare for themselves and it made them more interested in having food delivered directly to their home.”

It’s easier to make a large delivery to a grocery store than many small ones to individual homes, he said. This snarls and slows the delivery of goods even more.

In short, demand is high and supply is low, so prices go up.

The resulting inflation makes reentering the workforce less desirable, according to the U.’s Seegert. “Maybe you made $10 before and now you could make $15, but when you account for how much more everything costs with inflation, you might not be making much more.”

Sara Davis, chief financial officer of Wingers, said the restaurant chain has seen a jump in costs due to inflation, “but for us, that hasn’t affected us paying our people” — partly because it is a larger organization and partly because sales are up.

But, she added, a small independent restaurant may be in a more difficult situation. “Sysco is our food provider, and I know they had to drop a lot of their smaller, independent restaurant customers to keep going.”

Between being cut off from supply and having to compete with larger, high-revenue companies that offer major fringe benefits, small businesses are at a distinct disadvantage in the employee recruitment war. This may explain the more than 60 help-wanted signs we found posted on the doors of (mostly) small businesses in Salt Lake City.

Myth #2: Government needs to quit handing out money

Brigham Frandsen, an economics professor at Brigham Young University, says that extended unemployment benefits and stimulus payments are part of the labor shortage story, but only part.

“Americans weren’t necessarily in dire straits,” Frandsen said, “and so they didn’t have to take the first job that came along and, yes, that leads to fewer people in the workforce.”

The professor points to larger factors at play such as inflation. He also notes that a great many people left the workforce and that this affected women more than men.

“Families during the pandemic had to juggle work and child care and elder care,” Frandsen said, “and those burdens fell more heavily on women.”

This dovetailed with findings from Qualtrics. A recent study found a 5% drop among employees in their intention to stay with their current employer from last year to this year, but a 21% drop among senior leaders who are women.

“Our research throughout the pandemic has shown a lot of pressure on managers as they try to navigate under great uncertainty,” said Emily Heffter, head of public relations for Qualtrics. This, combined with home stresses, may explain the “exodus of high-performing women.”

All this ties back to the effect of government assistance on the labor shortage.

Seegert conducts ongoing research regarding Utah’s economy. A recent survey looked specifically at how the number of hours worked by Utahns would change if certain programs didn’t exist.

“We see only mild evidence for the effect of government programs,” he said. “Employees would work an average of 1.3 hours more if unemployment insurance didn’t exist and 1.7 hours more if the child tax credit didn’t exist.”

When researchers asked participants about child care, however, the evidence was far stronger. “We asked how many more hours a week would you work if child care were safe, affordable and freely available? Here the average was eight more hours a week.”

These findings are consistent with the argument that child care needs pulled (and continue to pull) more workers out of the labor force.

So what about the spate of instances where employees have posted signs at their work blaming their problems on government handouts?

Multiple business leaders saw these as the result of mounting frustration and the pressure left on managers and dedicated, long-term employees.

“These stalwart employees and managers are at their wit’s end,” said Arctic Circle’s Christensen. “They’re frustrated and customers can be very aggressive. Someone gets in their face and an employee takes a liberty they shouldn’t” — like hanging a sign.

Christensen added that Arctic Circle has adopted a policy at some of its locations where “if you feel you’re about to spill over and take it out on a customer, just close up early.”

Honeyville’s Ferry expressed a similar sentiment. “We seem to have lost respect for the front-line workers who go in every day, do their best, and help feed us and clothe us as a society.”

(Trent Nelson | The Salt Lake Tribune) Workers at Honeyville, Inc., in Ogden, on Thursday, Dec. 2, 2021.

Myth #3: The labor shortage only affects burger shops and hotels

The labor shortage does affect burger shops and hotels. Hard.

But it reaches far beyond these to affect tech companies like Qualtrics, Bacon and BambooHR, and advanced manufacturers like Stryker, a multinational medical technology giant whose neurovascular division is headquartered in Utah.

“We operate in your brain through your right leg while you’re having a stroke,” said Mark Paul, president of the division.

Stryker is expanding, or trying to, and facing the challenges of a tight labor market.

“We’ve had a great experience here in Salt Lake City,” Paul said. “Our employees are amazing, but we’ve had a hard time bringing in the talent to meet the demand.”

Harvard’s Shih notes that this is part of the challenge for Utah with the labor shortage. “You’ve got explosive growth,” which, combined with Utah’s exceptionally low 2.2% unemployment rate, means a shallow labor pool for its booming tech economy.

Companies like Bacon are trying to fill this gap by creating a marketplace for short-term labor. Its app lets flex workers find even a single shift to work, often with a catering company or factory.

“Unlike a traditional staffing company,” Bacon CEO Hunter Sebresos said, “users get to choose where they work, when they work.”

Bacon offers a solution for larger firms, like the University of Utah and doTERRA, but their 35% staffing fees are too steep for many smaller businesses.

Solutions

There are no clear-cut solutions, but unwinding the tangled web of Utah’s labor shortage does offer some direction.

For businesses

From Qualtrics to Arctic Circle, employers are seeking to understand their employees’ needs through surveys and focus groups. “The critical thing is not just to collect feedback,” said Qualtrics’ Heffter, “but to act on it.”

For Arctic Circle, this may mean gift cards to reward loyal employees who show up even when others call in sick. For BambooHR, it may mean treating an employee’s birthday as a paid day off. Ultimately, it’s about making even front-line employees feel vital to the future of the organization.

For policymakers

Qualtrics provides high-quality day care with flexible hours to its employees. Few small businesses can provide such perks. As the U. data shows, providing access to safe, affordable child care may be the surest way to bring people back into Utah’s labor force.

Another possibility is to create incentives for individuals to take on a side gig. There is strong evidence that a program in Germany that made part-time second jobs exempt from income and other taxes was effective at bringing more people into the workforce. Much more research would be needed to know if such a program could work in Utah, however.

For consumers

Evidence shows that the pandemic has been hard on the mental health of many. “Maybe the economy is temporarily broken, or maybe it’s being reinvented,” said the U.’s Seegert, “but either way things have changed.”

Whatever the case, experts we spoke with urge patience with those who serve us — whether on airlines, hospitals, or at the Arctic Circle around the corner.

Play the game

It’s one thing to read about the labor shortage. The Tribune has built a simple game to help put you in the shoes of workers and business owners at the front line of this evolving problem.

Play Job Crunch



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