Discover more from The 21 Hats Morning Report
Is It a Labor Shortage Or a Wage Shortage?
The Great Resignation continued in November with another record number of quits.
Here are today’s highlights:
Are we ready for live events?
It’s a good time to look for commercial space.
More burned-out employees are demanding—and getting—paid sabbaticals.
The push to re-shore factories is building slowly: “I’m the only one, the only crazy one.”
Startup founders are joining “T-groups” to learn empathy: “Think of it like a leadership retreat, but with more feelings. T-groups — where the ‘T’ stands for training — are well-known to Stanford MBAs, around 85 percent of whom participate in one through the popular ‘Interpersonal Dynamics’ elective before graduating. Now, T-groups are taking off with startup leaders beyond the university as tech entrepreneurs seek to optimize not just their businesses, but their own emotional skills. ‘It kind of feels like you’re hacking the communication cycle,’ said Dallin Harris, founder and president of the design and web development company Skyhook Interactive. ‘I don’t think I’ve ever done anything before or since that was more helpful to my career.’”
“To tech entrepreneurs who love to optimize their companies and their lives, T-groups offer a place to rapidly improve their own self-awareness and people skills: a weekend bootcamp to practice empathy, vulnerability and giving and receiving feedback.”
“A typical T-group might involve eight or a dozen participants and two facilitators. Attendees are told, as much as possible, to only discuss the ‘here and now’ — generally their own emotional experience and how they’re feeling about others in the group.”
“Alex Lofton, the co-founder and president of the home-buying startup Landed, likened the experience of T-group to ‘holding up a bunch of mirrors.’ By receiving constant feedback from others in the group, he learned that he tends to want to calm people down in order to diffuse tension — which made him realize he needed to prioritize hiring a head of people for Landed.” READ MORE
It’s a good time to be looking for commercial space: “To bring in some revenue, some landlords have given storefront windows over to digital advertising. Storefront occupants have long used flashy signs to grab attention for their own businesses. Now companies are bringing interactive ads for movies, automakers and sneaker brands to empty store windows, with landlords receiving a percentage of the amount charged to advertisers. Other landlords are allowing their empty windows to be filled with artwork — efforts that generate good will and make vacant spaces look less bleak. In Philadelphia, a tourism and marketing agency commissioned artworks that paid tribute to local Black- and brown-owned businesses.”
“Some landlords welcomed pop-up retailers, and not only during the typical holiday season. Retailers have embraced the trend as part of their marketing campaigns — luxury brands use them to kick off collections, e-commerce companies to introduce themselves, and companies of all types like the opportunity to test out a site.”
“‘A lot of real estate groups want to have a relationship with the next Warby Parker, the next Casper,’ said Melissa Gonzalez, founder and chief executive of the Lionesque Group, a retail consultancy. ‘This is how you get those relationships.’”
“Storefront, a digital listings platform where landlords advertise retail space suitable for pop-ups, saw more owners listing spaces, said Nicholas Roberts-Moore, the company’s head of marketing.” READ MORE
The push to bring factories closer to home is building slowly: “Companies like [Georgia-based] America Knits will test whether the United States can regain some of the manufacturing output it ceded in recent decades to China and other countries. ... Mr. Hawkins’s company, founded in 2019, has 65 workers producing premium T-shirts from locally grown cotton. He expects the work force to increase to 100 in the coming months. If the area is to have an industrial renaissance, it is so far a lonely one. ‘I’m the only one, the only crazy one,’ Mr. Hawkins said.”
“Called near-shoring, the move to Mexico is paralleled in Europe with factories opening in Eastern Europe to serve Western European markets like France and Germany.”
“‘We’re starting to see it in Mexico as well as in the U.S.,’ said Theresa Wagler, chief financial officer of Steel Dynamics, a steel maker based in Fort Wayne, Ind. ‘Many companies now prefer security of supply over cost.’”
“For items like shoes or furniture or holiday lights, for example, ‘the economics are daunting,’ said Willy C. Shih, a professor at Harvard Business School. ‘It’s hard to beat wages of $2.50 an hour.’” READ MORE
Once again, there were a record number of resignations in November: “The Labor Department on Tuesday said there were 10.6 million job openings at the end of November, a decrease from 11 million the prior month. The total number of quits reached 4.5 million after slightly falling in October from the previous month. The quits rate was 3 percent, up from 2.8 percent the prior month and returning to a record rate last seen in September.”
“Separately, more recent analysis of private-sector job openings showed demand for workers increasing at the end of December. There were 12 million job openings in the U.S. at the end of that month, according to estimates from job-search site Indeed.”
“The Labor Department figures lag behind private-sector data by about a month and don’t reflect any impact from the surge of the Omicron variant of Covid-19, which started building in December and is creating disruptions in parts of the economy.”
“Several industries are bearing the brunt of persistently elevated quits, including retail, leisure and hospitality, professional and business services, and healthcare and social assistance.”
“‘Everyone’s feeling the quit rate,’ said Diane Swonk, chief economist of Grant Thornton. ‘But there’s no question that it’s harder for smaller firms with lower wage workers who are having to compete with larger firms.’” READ MORE
But is it a labor shortage or a wage shortage? “The latest Job Openings and Labor Turnover Survey (JOLTS) release from the Bureau of Labor Statistics shows the quitting and hiring situation in November 2021. All told, about 3 percent of the total workforce quit. As noted above, in leisure and hospitality, that figure was roughly double. That stark divide in the quit rate for the low-wage restaurant and hotel industry — coupled with many job openings and robust hiring — suggests that the economy may be contending with a wage shortage, rather than a labor shortage.”
“Indeed, leisure and hospitality remains the lowest-paid industry tracked by the Bureau of Labor Statistics, with average hourly earnings of $19.20 as of November 2021.”
“Average hourly earnings for workers in leisure and hospitality have grown 13.6 percent between February 2020, right before the pandemic, and November 2021. Earnings for private sector workers overall have grown just 8.8 percent over that period.” READ MORE
Businesses are looking for ways to make offices feel safer: “One approach they’ve landed on is offering people accessories — wristbands or pins — that signal their preferences for social distancing, masking and shaking hands. Preserving personal space in the office isn’t a challenge unique to this moment. Still, the pandemic has given the task higher stakes, especially for employees who may feel professional pressure to get face time with their bosses. And now, with case counts rising sharply, workers are in even greater need of safety strategies.”
“At some workplaces, colorful wristbands have offered a way for people emerging from nearly two years of relative isolation to silently communicate their boundaries.”
“Cisco, for example, which has made its return to the office optional, equipped its conference rooms with technology that notifies people when they have exceeded the maximum occupancy limit.”
“The devices also inform workers about the air quality in the space, as well as how recently the rooms were cleaned.” READ MORE
School disruptions are further stressing parents: “The Covid surge hitting just as kids are expected back in classrooms is making life unpredictable for parents yet again. Parents find themselves abruptly thrown back into a pandemic stage they thought they’d escaped: worrying about school cancellations, managing remote learning and calculating quarantine periods. Especially in places where case levels are acute, parents wonder how they will provide care and instruction for their children if they are sent home; some express uncertainty about the safety of going to school. The fresh anxiety is straining already burned-out parents.”
“‘This is torture for parents,’ says Catherine Steiner-Adair, a clinical psychologist who works with families and children and has observed the anxiety firsthand. ‘It makes parents feel hopeless and powerless. The sense of fatigue is very real, and resilience is very frail.’”
“More than 3,500 schools shifted to remote learning or closed for at least one day this week, according to Burbio Inc., a data company that tracks K-12 school closures in 5,000 districts nationwide.” READ MORE
More burned-out employees are demanding—and getting—paid sabbaticals: “Workers are putting in more hours than ever nearly two years into the pandemic. They are in many cases burned out and believe a prolonged break is the best respite. Surprisingly, some companies agree. Employees who take sabbaticals say they return to work energized and more productive. Managers who are worried about retaining top talent and how the Covid-19 era is wearing on employees’ well-being find sabbaticals engender loyalty and greater creativity.”
“Sabbaticals still aren’t mainstream: 5 percent of companies offered them in 2019, according to the Society for Human Resource Management. The organization doesn’t have data on what’s happened to the perk during the pandemic or whether people remain at their jobs long term after taking a sabbatical.”
“One study of 50 people who took extended time off from work found that most of the interview subjects suffered from ‘functional workaholism,’ according to the Sabbatical Project, which conducted the research.”
“Catherine Merritt, CEO of Spool Marketing in Chicago, said she started offering her employees sabbaticals this past fall after seeing pandemic-induced burnout take a toll on her workforce. Employees who’ve been with the company for three years can take three paid weeks off in addition to their vacation time.” READ MORE
THE COVID ECONOMY
Are we ready for live events? In December, the CEO of the consumer technology association explained why the CES show would go on: “CES is the world’s largest innovation event, and we have thousands of people coming from around the world to see and show products that will make life better. Innovation can come from anywhere and anybody, and we must respect and encourage that. This conviction informs all of our public policy positions, and the major tech companies — almost all of whom are our members — respect CTA for always looking out for smaller companies. Indeed, at CES and even as members of CTA, more than 80 percent of our membership is smaller companies.”
“As we look to CES 2022, we confront a tough choice. If we cancel the show, we will hurt thousands of smaller companies, entrepreneurs and innovators who have made investments in building their exhibits and are counting on CES for their business, inspiration and future.”
“CES 2022 will kick off 2022 in messy fashion, but it will be chock full of innovation and full of entrepreneurs and businesses. We will all be taking risks. But without risk there is no innovation.” READ MORE
Joseph Kitonga, a 24-year-old Kenyan immigrant, started a company that helps businesses provide primary medical care to hourly workers: “Vitable, headquartered in [Pennsylvania] with a second office in Northern Liberties, sells virtual and in-person primary and urgent-care services to small employers of hourly workers, charging about $50 a month per employee. The company has gained a foothold in a competitive arena, joining such tech titans as Amazon.com in aiming to eliminate inefficiencies and inconvenience in basic care.”
“The firm has already signed up 10,000 people in its current markets of Southeastern Pennsylvania and Delaware.”
“Last year, Vitable went through the prestigious Silicon Valley technology start-up accelerator Y Combinator, and Kitonga won a fellowship from billionaire tech investor Peter Thiel’s foundation.”
“The fellowship includes $100,000 over two years for young entrepreneurs who skip college or drop out to build a business.” READ MORE
THE 21 HATS PODCAST
When Fred Warmbier Wanted to Quit, Deming Brought Him Back: This week, we feature a special guest, Fred Warmbier, owner of a metal-finishing business he founded in Cincinnati in 1998. About 10 years ago, Warmbier was ready to walk away from that business. “It just never seemed like I could have the type of business that I wanted,” he says, “where things worked properly and our employees were happy and our customers were happy.” That changed when he discovered the Deming Management Method through a consultant, Kelly Allan, who helped him tame the chaos. Where does one start with Deming? “You start,” says Allan, who is chairman of the Advisory Council of The W. Edwards Deming Institute, “where the pain is.” As it happens, and as he discusses in this conversation, Fred Warmbier has experienced more than his share of pain.
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