Yahoo Finance ran a story recently on labor shortages in various parts of the country, and the difficulty some companies have finding qualified workers. One business owner, Nathan Scherer of SEI Manufacturing in Cromwell, Ind., even told us business opportunities in Indiana would allow him to double revenue if he were able to hire all the employees he needs.
That story prompted a lot of vigorous feedback. If companies need more workers, why don’t they just pay more? If they can’t find people with the right skills, why don’t they train them? What does it take to get a good job, anyway?
We decided to put those questions to Scherer himself. Here’s an edited Q&A:
Yahoo Finance: First, why don’t you describe your company.
Nathan Scherer: My company is a small mom-and-pop style business, not a Fortune 500 business. We make low-volume components, mostly for the marine industry. I have about 35 employees.
And you’ve had a hard time finding workers lately?
The unemployment rate in my area is about 2%. [Indiana’s unemployment rate is 3.6%, lower than the national rate, now at 4.3%.] We’ve struggled to hire office staff, entry-level, skilled and highly skilled employees. Almost every business owner around here is struggling to find help. Help wanted signs are posted throughout the community. We have three key positions open right now, which amounts to almost 10% of our workforce.
[Please take our survey: Do you trust American companies? The results will appear in future Yahoo Finance stories.]
Are you paying more these days?
We have been paying more. Starting wages have gone up 20% to 30% in the last three years. At the entry-level, we’ve had to raise starting pay from $11 per hour to over $13 per hour. That’s for somebody with little to no applicable skills, in need of significant training. For skilled workers, pay has gone from $14 or $15 to $18 to $20, and highly skilled, even higher.
Are you losing business because you can’t find enough workers to fill orders?
We’re not turning down orders. We can handle the customers we have. My concern is that we will have to reevaluate that at some point. It’s a tough decision to say no to opportunities. One of the fears is that you will not get a second chance at the opportunities if you pass them up. I have heard of some businesses turning down orders or even firing customers.
Our readers raise a reasonable question: Why don’t you pay even more to get the people you need?
We will as long as it makes sense. If there was a direct correlation between the amount you pay somebody and the amount you’re able to get as an output, including loyalty and dedication, simply paying more would be a no brainer, but business isn’t just binary. Some businesses have price inelasticity, high fixed expenses and tight margins, and raising wages too quickly could greatly affect the company’s ability to turn a profit. You can’t just say, I’m going to raise labor costs without considering all the other variables that impact the business.
I was recently recruiting an engineer from an auto parts manufacturer. I gave the candidate an offer that was better than what she was making, and she admitted she wasn’t happy at her job, and was concerned about the future of that company. When she put in her notice, the company came back to her with an $18,000 increase and she backed out of the job with us. Simply paying someone more money doesn’t ensure loyalty or guarantee they will take the job.
What kind of workers are hard to find?
Right now in our area, all kinds, at all wages. We have struggled to find people from the front to the back of the business. Office workers, service workers, trades people, general labor, engineers, sales people.
Do you have trouble getting dedicated workers?
Getting people to show up is as important as getting people with skills. If you’re absent, chronically missing work or always late, you are not protecting your job or concerned with your future at the company. It’s hard to want to help those people. When the unemployment rate is under 2%, the people who are responsible, really good, valuable, are taken, so you have to figure out how to attract good workers from other companies. Many business owners and HR folks I have talked to feel there is a lack of dedication in the available workforce. I do see where some workers could say the same thing about employers. I know using temp agencies for extended lengths of time is rather popular right now.
What do you do when you need skilled workers you can’t find? Do you train them yourself?
We do a fair amount of on-the-job training because for a fair portion of what we do, people are not going to have the exact skills or experience required. This is why our pay scale may be initially lower than other jobs in the area. But we try to move people up in pay as they become proficient. There are good training resources in our area as well and we have looked into using them in the future.
Some people are willing to move in order to find a better job. But a lot of people also say they don’t want to move because they don’t trust employers. They worry they’ll just get laid off again in six months or a year, after going to the trouble and expense of moving. Would you ever offer some kind of job guarantee to somebody who moved to work for you?
Unless you’re a pro athlete, I don’t know of too many positions that have guarantees. I do empathize with people who are in that situation you describe, and I feel for businesses who have moved someone and they quit abruptly as well. I do think the relationship between employees and workers has been damaged by both sides in the last several decades. Companies have been known to pull up stakes and move or have sweeping layoffs and workers are more frequently only committing themselves to a company or even a career for a short period of time. I would never say never and sometimes you have to take a risk, especially if it is the right hire.
Confidential tip line: firstname.lastname@example.org
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman