On the Road with ITR Economics

  • by itradmin - Wed, 05/17/2017 - 07:12

One of the recurring topics that I discuss with ITR’s clients while on the road is the lack of skilled workers in today’s labor pool. It is an ongoing problem for companies both big and small, and it reflects a tight job market that is now operating at “full-employment” levels. Businesses are spending more and more resources to acquire skilled workers, including offering higher hourly wages and starting bonuses, as the competition for limited labor intensifies along with an accelerating US economy. The rising costs associated with acquiring skilled talent are evident when comparing two segments of the Wholesale Trade industry: Durable and Nondurable Goods.

Nondurable goods consist of food, beverages, tobacco, leather, textiles, printing, chemicals, and plastics. These products have high output volumes and require lower skill levels to manufacture, making them the low-hanging fruit for automation. During the 12 months ending in March, Average Hourly Earnings for Wholesale Trade of Nondurable Goods employees were $25.48/hour, up 1.4% on a year-over-year basis. In contrast, the 12-month moving average for Hourly Earnings for Wholesale Trade of Durable Goods workers was $29.64/hour in March, 4.2% above last year. Durable Goods are products that last for at least three years, including home and office furnishings, photographic equipment, motor vehicles, turbines and semiconductors. These products are more complex to produce than nondurable goods and require more skilled labor.

The divergence in the wage growth of the Durable and Nondurable Wholesale Trade industries is clearly evident in the chart above. It is for this reason that my advice to businesses is to make the retention of skilled workers a strategic focus and a top priority in their organizations. Not only will retaining these workers allow companies to mitigate the rising cost of labor – after all, keeping existing employees has been proven time and time again to be less costly than hiring new workers – but it will also ease the burden of finding new skilled talent in the increasingly tight and expensive job market.

Alex Chausovsky
Senior Analyst