Staffing firms confront hiring difficulties in NC. Are unemployment benefits to blame?

Some blue collar industries are suffering a worker shortage as the economy bounces back from the pandemic and the impact is being felt locally by staffing firms.

The effects are being felt among some distribution centers, factories and construction sites in the Triangle, since staffing firms that supplement and hire their pools of temporary or contract workers are struggling to fill hundreds of positions in the area.

Some employers and economists say that extended unemployment benefits for workers play a key factor.

State Republican legislators cited the labor shortage behind passing a bill to cut off federal unemployment benefits that include an additional $300 a week for eligible recipients, which would leave recipients in North Carolina with the lowest benefits of any state in the U.S.

State unemployment benefits amount up to an average of $195 in addition to federal benefits, adding to about $500 weekly, which “is barely enough to make ends meet for most people,” said state Sen. Wiley Nickel, a Democrat from Cary who is on the legislature’s unemployment committee and voted against the bill.

Gov. Roy Cooper vetoed the bill earlier this month, extending the benefits until its federal cutoff on Sept. 6, saying that ending benefits stops money from being “injected into the economy with people using it for things like food and rent,” The News & Observer reported.

“The sooner those benefits can come to an end, the better for us because can get our customers the talent they need,” said Leigh Whitehurst, a regional manager for Hire Dynamics, a staffing firm with an office in Durham. “The jobs are out there, the trouble is getting people to go to work.”

Her firm hires hundreds of temporary and full-time workers in the area for several businesses that utilize distribution, manufacturing and light industrial work to operate, such as e-commerce businesses.

Although the typical average worker turnover rate has been around 25%, the rates have risen to roughly 55% this year for Hire Dynamics. Firms have been raising wages as a result to compete for talent.

Struggling to fill jobs

“In [the Triangle] market alone, we have 300+ jobs available,” said Whitehurst. “We’re trying to attract talent for our customers and raising pay rates seem to be that driving force for us to do so.”

The labor shortage has given workers leverage to negotiate higher pay and many clients of Hire Dynamics have driven hourly wages up to between $15 and $17 an hour for jobs that previously paid $10 to $12 an hour. This is good for workers, Whitehurst said, but it comes at a cost.

“They want to raise the wages but they’ve also got to consider the financial impact on the people already working there,” she said. “They have to raise pay for full-time people, too.”

Whitehurst said she hopes that the necessary jobs can be filled in the Triangle in time for the holiday season in the late fall when demand for goods will rise.

“You know they’re looking for forklift operators, they’re looking for machine operators, machine handlers, packaging and inspecting,” Allen Tuttle, a director of operations for Allegiance Staffing in the Charlotte area, told WCNC this month.

Staff Zone, which hires hundreds of part-time construction contractors in the Triangle, also believes extended unemployment benefits are driving the shortage.

“The unemployment and the additional aid that has been given out since last March on top of unemployment is pretty much what our hourly workforce is paid so they’re getting free paid vacations to stay at home and there’s no reason for them to to come work,” said Tony Colicchio, national director of operations for Staff Zone.

The benefits should continue for those who need them, but he said conditions now are safe to return to work for those who are able.

“We’ve called thousands of people over the last six to eight months and spent tens of thousands on recruiting, on advertising, on social media and all those other formats,” he said. “And we’re still hundreds people short every day.”

Colicchio says it’s been difficult to fill necessary positions for about a year, and he understands that many workers were reluctant to return when there wasn’t a vaccine available.

“But now we’ve started getting vaccinations and the states dropped the mask mandates,” he said. “We’re looking forward to people realizing it’s time to go back to work.”

Manpower, one of the largest staffing firms globally, is finding it hard to fill the positions that have freed up among its client companies in the Triangle.

First it was fear of the virus, then the need of workers to keep their families safe and care for them that kept people out of the workforce, Manpower marketing manager Katherine Meyer said in an interview.

“COVID really affected women in the workplace, more so than males. Because typically women still are the primary caregiver in most situations, and without having access to child care, depending on their child care needs... they couldn’t do both, especially if you’re working in a manufacturing environment, you can’t work from home,” said Meyer.

The additional unemployment benefits are likely also at play behind workers’ reluctance to return, she said.

Does cutting benefits work?

Nationwide, many Republican-run states have ended their residents’ benefits early, but states like Missouri that cut aid off early haven’t shown signs of the workforce returning as expected. But activity in other states suggest cutting aid may reduce shortages, according to the Wall Street Journal.

“We find no evidence that high UI [unemployment insurance] replacement rates drove job losses or slowed rehiring,” read one study by economists at the National Bureau of Economic Research last summer when benefits were $600 a week, double the current amount.

States with more generous benefits led to faster recoveries and less economic decline, the study said.

“The messaging in this is nothing more than furthering a false narrative that North Carolina workers are lazy and that’s absolutely not the case,” said Sen. Nickel. “That’s money to help pay for rent, to pay off groceries, your health care and finally, the federal benefits end on September 6th, so it would just be cruel to put these people in jeopardy in this window of time before the benefits expire.”

Child care for workers who are parents can be as high as $800 a month, which low-wage jobs would struggle to cover, he said.

“I think that given that North Carolina’s unemployment benefits are fairly small, federal unemployment benefits represent a major change to the underlying economics of our labor market,” Wells Fargo senior economist Mark Vitner told The N&O. “Not everyone who is unemployed is receiving federal benefits, so it’s certainly not the only issue, but it is the largest single issue.”

Cutting off federal aid can particularly hurt people of color and residents of rural areas saddled with slow job growth and limited transportation options and job opportunities, the state policy news site Stateline reported.

“The problem is that we don’t have a lot of good options, because there’s still a lot of fear about tracking the virus by folks who are not vaccinated or have children who can’t be vaccinated,” said Vitner. “There’s difficulty in folks getting getting affordable child care. There’s also a lot of (competing demand) for workers because the hiring in warehousing and distribution is really strong right now.”

These industries are also pulling workers away from the restaurant, bar and entertainment industries, he said.

In North Carolina the question remains as to why people won’t go back to work, with legislators on different sides of the aisle pointing to federal benefits, the minimum wage and high cost of child care — all factors that Vitner says are at play.

“A step towards normal” within the labor force is expected in September when benefits end and public schools reopen, according to a Wells Fargo economic outlook for the year.