PA Images/Sipa USA

Staffing up for the holidays was already tough. Then came Amazon

October 08, 2018 - 9:27 am

By Lydia DePillis

(CNN) -- For companies trying to staff up for the holidays, Amazon's move to a $15 minimum wage comes at a bad time.

"It's causing a lot of buzz with my clients: How do we address the issue of a $15 minimum wage?" says Craig Rowley, who leads the consumer practice at the human resources consultancy Korn Ferry. "Here's a major employer announcing they're going to $15 an hour — not in two to three years, but right now."

Retailers and shippers were already preparing for a busier-than-usual holiday season in the tightest labor market in a generation.

An estimated 589,000 seasonal positions have been announced, according to outplacement firm Challenger, Gray & Christmas, and companies were jockeying to attract workers with perks such as paid time off, transportation reimbursement, and higher pay.

In January, Walmart announced a new $11 across-the-board minimum wage, along with a new relatively generous parental leave policy. Target soon did Walmart one better, making $12 its floor and charting a path to $15 by 2020.

Amazon's sudden jump blows them both away.

Unlike Amazon, which has alternative revenue streams like advertising and its cloud computing business, a brick and mortar store has less wiggle room for wage hikes.

A typical retail "labor budget" is confined to between 5% and 12% of sales, according to Rowley — and shareholders expect it to stay that way.

"Amazon is a darling of the investment community," Rowley says. "The market is enamored with their potential for growth, whether they make a profit or not. It drives all the retailers crazy."

To complicate matters even further this season, the Census Bureau is beginning the process of hiring hundreds of thousands of people for its 2020 count. Census wages start around $13.50 an hour and go up in higher-wage counties.

Andy Challenger, vice president of Challenger, Gray & Christmas, says it's been a long time since employers faced a shortage of hires during the holiday season. The consequences of falling short are real: Gifts ordered online could come late and force refunds, stores could be overcrowded, and shelves could get messy, pushing more shoppers toward a fully staffed Amazon.

"Big box retailers could cede greater portions of their business to online retailers like Amazon that do have employees," Challenger says. "If you're seeing really long lines at some major retailer, and you know you could just buy it online instead and not have to wait, it makes it a little bit more attractive."

That doesn't mean employers gearing up for the holiday season — and beyond — are necessarily doomed.

First of all, it's not clear that Amazon will directly compete for the same workers. Amazon's distribution network has been moving closer in to cities through Prime Now hubs and Whole Foods stores. But its fulfillment centers are still usually far outside city centers, so they're not as easily accessible as jobs in malls and department stores.

And fulfillment center work requires a certain amount of physical fitness, making jobs in fulfillment less attractive for older workers and others with limited mobility, who might prefer customer service roles.

The current labor force also has plenty of workers who are willing to work more hours or looking for second jobs, says Laurie Bouillion Larrea, president of Workforce Solutions of Greater Dallas, a nonprofit that connects job-seekers with employers.

"There are people who need that second job desperately, if for nothing else to pay for the benefits they have with the first job," Larrea says. Even public school teachers, she says, are paid so little that they are willing to work somewhere else after class is out or on the weekends.

Researchers at the job platform have found that more workers are searching for terms like "full-time" and "9 to 5," and because of the tight labor market, more companies are offering permanent jobs rather than seasonal ones.

The-CNN-Wire™ & © 2018 Cable News Network, Inc., a Time Warner Company. All rights reserved.