Labour shortage in the US logistics market

Labour shortage warehouse

The US labour market is experiencing a labour shortage as it emerges from the Covid-19 pandemic. The Peterson Institute for International Economics published statistics that showed while jobs have been ‘added to the market’ unemployment still rose in April of this year. The article, ‘The US labor market is running hot…or not?’, said, “The United States added 266,000 jobs in April while the unemployment rate rose slightly to 6.1% with the realistic unemployment rate”, demonstrating the shortage in workers. The Covid-19 pandemic has exacerbated the US’ labour shortage in its logistics industry, though this has been a persistent issue for some time. The problem is also present and persistent in Europe. Currently, the most prevalent gap can be found, though not exclusively, in entry-level jobs across the industry in both markets.

For both the US and Europe, the reason for the present shortage is linked to the winding down of Covid-19 restrictions and the subsequent reopening of the economy. As the respective economies got started once again, demand boomed in retail as well as manufacturing. The increase in volumes, especially in e-commerce, put pressure on the logistics industry and in particular the express sector. Fulfilment and last-mile operations have rapidly grown over the last year as B2C volumes rocketed. As growth continues, the employment landscape is changing, and warehousing staff and delivery drivers are in short supply. The reasons for this are varied but include the availability of better paying, more desirable and suitable jobs on the back of economic reopening and growth.

In an article published by Logistics Management titled “Logistics Labor: Solving the talent gap”, the situation is being described as a ‘perfect storm’, with many factors exacerbating the shortage as employee expectations and preferences change as well as the market landscape, it must be noted that companies are finding this a difficult time to find and recruit workers as well as retain them.

An example of the difficulties and impact of the shortage is FedEx. In its annual results and the consequent results conference call, some issues were highlighted regarding the labour crunch. Raj Subramaniam, President and COO at FedEx, commented that “the labour market in the US over the last several months has been quite challenging, adversely affecting hiring and leading to significant reengineering of parts of our networks to deal with the lack of these resources.” Essentially, the shortage is negatively impacting productivity as well as creating process issues incurring significant costs, due to a lack of staff. To mitigate the issues and attract new workers, the company has increased wages, meaning it has had to increase surcharges and rates to cover these rising labour costs, which are in turn are passed on to the consumer.

This is not solely a FedEx issue but affects the wider sector; however, Amazon is not facing the same crunch, likely due to its higher-than-average wages. In the US, Amazon says it pays an industry-leading minimum starting wage of $15 per hour, this is accompanied by several benefits for full-time employees. The shortage of workers has meant providers’ productivity has reduced, while labour costs and other process costs have risen. The present issue is being most urgently felt in warehouses and by express providers. Though labour shortages in the logistics industry are not new and the pandemic has only exaggerated an existing problem, overall, it highlights the issues with employment in the logistics industry and raises questions of why these shortages are an ongoing problem and how it can be and should be solved. 

Source: Transport Intelligence, July 1, 2021

Author: Holly Stewart