More employers raise starting pay, eager to get rolling again

·7 min read

For Jon Halper, owner of Top Ten Liquors stores in the Twin Cities, there were lots of good reasons to boost starting wages from $12 to $15 an hour.

Sales have been strong, with the pandemic spurring a surge in alcohol consumption at home. He's got new stores on the horizon, and he wants to make sure the existing ones continue to offer good customer service. And then, there's the matter of finding workers.

"It's become very challenging to hire people in the environment we're in," Halper said. "So we felt we needed to make a move."

Top Ten Liquors is one of a number of companies increasing wages as they struggle to hire. Even as businesses ramp up again, the labor market still has a ways to go to heal from the pandemic with many workers still on the sidelines for various reasons.

Around the Twin Cities, Punch Pizza recently raised its minimum hourly wage to $15, as Valleyfair did for its seasonal food and beverage jobs. Nationwide, McDonald's company-owned stores and Chipotle announced pay bumps in recent weeks. Amazon, which set a minimum wage of $15 an hour a few years ago, has said it will pay new workers an average of $17 an hour and is offering as much as $1,000 in signing bonuses. Bank of America said last week it will raise the hourly minimum wage for its U.S. employees to $25 by 2025, up from $20.

But economists and labor analysts say the overall wage trend is more complicated.

In Minnesota, wages were up slightly in April, but by a smaller amount than in previous months. That's likely because more lower-wage workers have been coming back to work, said Oriane Casale, director of the labor market information office at the Minnesota Department of Employment and Economic Development (DEED).

While wages do seem to be rising more in sectors like restaurants and bars, it's not happening across the board, said Ron Wirtz, regional outreach director for the Federal Reserve Bank of Minneapolis.

In an April survey of regional businesses, the Minneapolis Fed found that 80% of firms reported they had increased pay in the past year by less than 3%, which is modest growth and in line with historic trends.

Businesses in sectors such as entertainment, nonprofits, professional services and health care reported lower-than-average pay increases as some of those industries have been struggling with revenue because of the pandemic, Wirtz said. But others, such as construction and manufacturing, which were facing labor shortages before the pandemic and have seen more persistent demand, reported much stronger wage growth.

Restaurants and hotels also appear to be feeling wage pressure. In a more recent Minneapolis Fed survey of hospitality businesses, about 40% said they had raised wages by more than 3% in the past year, he said.

"The reason they're raising wages is they're seeing stronger demand," said Wirtz. "And there may be some situations where they're going to have pay higher because maybe they weren't particularly good paying to begin with."

Heidi Shierholz, policy director at the Economic Policy Institute, calculated that wages in leisure and hospitality increased at an annualized rate of nearly 18% in the past three months. But she said that mostly just made up for declines in the earlier part of the recession.

"We've had a big acceleration in recent months, but in no way are wages out of whack," she said. "They're roughly what you would expect if COVID hadn't happened. They are still extremely low. It's the lowest wage sector by far in our economy."

Some employers are finding themselves having to entice workers, some of whom still are reticent about returning to in-person workplaces because of the virus or struggles with child care. Some workers have moved on to other industries, while others are debating next steps while they continue to receive enhanced unemployment benefits. A $300 weekly supplement from the federal government lasts through August.

"I don't believe here in Minnesota that the $300 federal addition is disincentivizing a large number," Gov. Tim Walz said last week, in response to a reporter's question about whether people are putting off job hunting because of government assistance.

"What we're starting to see is a realignment of folks who aren't going back to the same jobs. They're looking for better wages. This is overdue," Walz said. "I'm empathetic to business owners that have to make that balance, but it certainly can't be on the backs of workers."

Participation in the labor force has seen a big drop, too. There are about 95,000 fewer Minnesotans who are working or looking for work than before the pandemic. Some may have decided to retire early. How many of those people return to the workforce could depend in part on whether wages being offered are enough to entice them off the sidelines.

A recent DEED analysis shows that laid-off Minnesotans who returned to their previous jobs last summer, which was the case for about 59% of the state's unemployment benefits recipients, were generally able to make as much money as they did before.

But those who took different jobs last summer were more likely to end up making less than before. Nearly one-third of this group experienced a pay drop of more than 10%.

DEED Commissioner Steve Grove noted that in all the job vacancies in Minnesota right now, the average wage is about 80% of the median pay of the rest of the state's economy. So the wage growth that is happening in some areas "is not a bad thing," he said.

"If you're looking for a job and the jobs that are out there pay less than the average wage in the state, it makes the decision a little bit more tricky," he said.

Some businesses, which may be reluctant to permanently raise wages that are harder to later retract if the labor market improves, are instead offering sign-on or retention bonuses to attract workers.

Others are still debating whether to raise wages. Mall of America said in a statement that it is evaluating its compensation, benefits and workplace environment as it, like many stores and restaurants at the mall, are finding it challenging to fill open positions.

Some businesses, especially ones that already raised wages, say they're seeing enough applicants. Target, which raised its minimum wage to $15 last year, isn't feeling a worker shortage, its chief executive, Brian Cornell, said recently.

With business picking up, St. Paul-based Anchor Paper Co. is looking to ramp up production at its facility in River Falls, Wis., going to two shifts after paring back to one earlier in the pandemic, said CEO Brooke Lee. But it's having trouble filling a half-dozen spots, with some new hires not showing up on the first day. It recently rolled out more financial incentives for workers who make it through training and stay on.

"We're definitely having to be more savvy in how we compete to attract talent," she said, adding that the company has also started reaching out to temp agencies to help with recruitment.

Karl Amlie, owner of the Express Employment Professionals franchise in Forest Lake, said his staffing agency has been "busier than heck" this year. He is hearing from not only manufacturing firms but also new clients such as hotels, landscaping and construction companies seeking extra help to recruit for positions.

He said a lot of those businesses have raised hourly pay by $1 or $2 to persuade people receiving unemployment benefits to return to work. Higher wages do seem to help fill jobs more quickly, he said.

"But it can still be a struggle," Amlie said. "It's not a magic bullet."

Halper, owner of Top Ten Liquors, said it's still too early to know for sure if the higher wages, which also include raises for assistant managers, will attract good employees to fill 40 or so open positions. But the move has definitely been welcomed by existing employees.

"They feel we're now a lot more viable for them to work for us, and they feel like they can continue to work for us rather than looking for other jobs," he said.

Staff writer Nicole Norfleet contributed to this report.

Kavita Kumar • 612-673-4113

Twitter: @kavitakumar