Historic Inflation and Labor Shortage Forcing Businesses to Raise Prices
Irvine, CA - March 08, 2023
Historic Inflation and Labor Shortage
Forcing Businesses to Raise Prices
Record low unemployment may
mean good news for American job seekers but coupled with stubbornly high
inflation, companies are being forced to make difficult choices to stay afloat,
including continuing to pass on increased operating costs to consumers.
This is according to a survey
from The Harris Poll commissioned by Express Employment Professionals.
Over the past few years,
companies have had firsthand experience with a variety of obstacles—a global
pandemic, inflation, labor shortages and even the fear of a recession.
Unfortunately, they still may be witnessing the effects of some of these
challenges in the years to come, one of which is the labor shortage.
Apart from having an impact on
hiring, companies say that if the labor shortage continues, they will have to
raise prices (30%). Around 3 in 10 also report their company plans to absorb
some of the additional costs (29%), adopt new technology to automate
tasks/processes (27%) and/or outsource a portion of their work (27%) as a
result.
Another challenge that may impact companies in the future
is inflation. In the first half of 2022, nearly all hiring managers (92%) said
their company had been impacted by the rise in inflation, with nearly
two-thirds (65%) reporting it had a major/moderate impact on their company.
As a result, companies said they had to raise prices
(40%) and/or absorb some of the additional costs (39%). In line with these
sentiments, hiring managers report that if inflation continues, their company
is planning to raise prices (43%), absorb some of the additional costs (31%),
adopt new technology to automate tasks/processes (23%), reduce staff (19%)
and/or outsource a portion of their work (19%).
Inflation Impacts
“If high inflation continues, my clients will have to
find ways to cut costs in other areas,” said Mike Nolfo, Express franchise
owner in New Jersey. “Something has to give. Normally, labor is one of the
larger operating expenses, which may translate to price pressure on services
and goods.”
In Texas, Express franchise owner Nancy Reed agrees that
companies will have to re-evaluate their business strategies if inflation
doesn’t ease up soon.
“All costs are going up, and they may have to evaluate
their structure and payroll budgets,” she said. “We are having to pay higher
wages which means some employers will have to work with fewer employees.”
The high prices aren’t showing many signs of budging in
the near future, and Reed says it seems like her clients are just trying to
push through it.
“Everyone is ready to get our market back to normal after
all the challenges during and after COVID-19,” she said. “They are trying to
adjust for the increase in their material costs, labor expenses and trying to
get products to market as quickly as possible.”
Businesses may have to wait awhile for commodity prices
to return to more manageable levels, as Nolfo says he doesn’t expect any relief
in the next 12 months.
“It seems like everyone is getting used to paying higher
prices,” he said. “They may not be happy about it, but they’ve made adjustments
in other areas to deal with the changes."
Staffing Challenges
In addition to inflation struggles, Reed says her
staffing business is seeing the effects of the labor shortage like many of the
companies she serves.
“If the labor shortage continues, my clients will be
forced to find creative ways to get their product to market, such as using
automation or being selective with the business they take on,” she said. “Even
in our business, we are finding ourselves having to pay higher wages or work
with less staff.”
Nolfo sees automation as one solution to the labor
shortage but also encourages training employees to create a desirable
workforce.
“If you are going to stay in business, you need to
adapt,” he said. “The best way to combat the labor shortage is to either
automate or train your entry-level workers to fill in the gaps.”
The good news, Nolfo says, is that the labor market seems
to be improving, especially in the light industrial sector, as applicants
increased 20% year-over-year in January.
“Candidates seem like they are motivated to find work,
and our referrals have also increased,” he said. “I think some job seekers are
tired of sitting on the sidelines and actually need work right now.”
The latest jobs report shows openings are numerous, which
means despite layoffs in certain sectors, many companies are still desperate
for workers, according to Express Employment International CEO Bill Stoller.
“The employment landscape right now is an anomaly as
employers struggle to find workers but also face exorbitant costs for talent,”
he said. “Let’s hope as the year goes on, more candidates continue to come off
the sidelines, ultimately tamping down inflation and market uncertainty.”
Survey Methodology
The Job Insights survey was conducted online within the
United States by The Harris Poll on behalf of Express Employment Professionals
between Dec. 1 and Dec. 15, 2022, among 1,002 U.S. hiring decision-makers
(defined as adults ages 18+ in the U.S. who are employed full-time or
self-employed, work at companies with more than one employee, and have
full/significant involvement in hiring decisions at their company). Data were
weighted where necessary by company size to bring them into line with their
actual proportions in the population. Respondents for this survey were selected
from among those who have agreed to participate in our surveys. The sampling
precision of Harris online polls is measured by using a Bayesian credible
interval. For this study, the sample data is accurate to within + 3.2
percentage points using a 95% confidence level. This credible interval will be
wider among subsets of the surveyed population of interest.
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The
Irvine Express office is located at 13700 Alton Parkway, Suite 156 Irvine, CA
92618 and serves the Irvine, Tustin, Lake Forest, Foothill Ranch, Mission Viejo
and Rancho Santa Margarita marketplace. Local businesses and applicants are
encouraged to get in touch at their convenience. Call 949.583.7400 or visit
www.expresspros.com/irvineca/.