The Economic Policy Institute says that the U.S. labor shortage is a manufactured one. They suggest there isn’t a labor shortage at all, but that employers aren’t able or willing to increase wages high enough to attract workers. They state, “I often suggest that whenever anyone says, ‘I can’t find the workers I need,’ she should really add, ‘at the wages I want to pay.’” While many states implemented higher minimum wages, business owners in states that didn’t recognize that raises may be necessary if they want to find talent in a competitive market. How can companies cut costs and adjust their budgets to help offset the cost of labor?
How to Find the Money to Increase Worker Wages
As wages rise, small companies may feel the sting and need to cut costs and adjust their budgets. Some of the ways these firms can cut corners includes:
- Cutting back on business and taking fewer orders—at least temporarily.
- Reduce costs. Start with an audit of how you spend money in your business. Where can you reduce expenses?
- Find ways to increase productivity. How can your business increase sales without increasing worker hours or reducing service quality? How can you save time? Can you cut production time? Are their workflows that can be trimmed?
- Change how you staff. Consider whether you are maximizing your payroll ROI given the volume of work that you currently have. Can you schedule in a way that tightens your belt in this area? Are there workers who should be replaced my more productive employees? Is there a way to retrain some of your top employees to stretch their efforts a little further?
- Reduce turnover and retain employees longer. The amount of time you spend replacing employees could be better spent on building your business. We know it costs more to recruit new workers than it does to retain your existing workforce.
- Engage your employees in this effort. What employee wouldn’t be glad to know you are trying to increase wages? Why not take this problem to your workforce and talk transparently about ways to improve productivity and cut costs? You might be surprised by the quality of the suggestions you hear.
- Increase prices. Many employers are going this route. It may not be the best option, given the rate of competition in the marketplace. Consider this carefully in light of your specific service area and the volume of competition (and their rates). You may not be able to pass 100% of your increasing labor costs into product pricing, but if you can reduce turnover, increase productivity, cut costs, and incrementally raise your pricing—now you’re getting closer.
- Finally, you could also simply accept reduced profits for a time. The Economic Policy Institute says that higher wages will engage workers and keep them more productive. If this is true, then the long-term effect of wage hikes will likely offset any reduced profits that you experience in the short term.
If you’re trying to attract talent, we know that higher wages are a market differentiator. Lingo Staffing works with companies to source and hire the best workforce. Our work frees up companies to focus on the strategies that are important to their business. We can help you meet your hiring goals. Contact us today.