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Will there be bidding wars for warehouse labor?

It may take very good money to attract workers this peak season

Making a lot more this peak (Photo: Jim Allen/FreightWaves)

It is a near-certainty the 2020 peak holiday shipping cycle will break all records for volumes. The seasonal shopping frenzy will no doubt converge with elevated e-commerce traffic as shoppers concerned about COVID-19 continue to restrict their in-store buying.

What is far from certain is the availability of warehouse and distribution center labor to handle all the goods, and what it will cost warehouse operators to bring labor under their roofs for the holidays.

The pandemic has scrambled the fulfillment labor omelet. Despite high levels of blue-collar unemployment that would seem to make warehouse jobs attractive, people claiming $300-$400 of weekly enhanced unemployment benefits through the end of the year, on top of their regular state benefit, may forgo the day or night shifts in favor of staying home. Fragmented and erratic school schedules caused by government measures to control the pandemic’s spread may make it difficult for parents to fully commit to warehouse timetables. Prospective workers may be concerned about contracting the virus in a warehouse. In addition, they may be reluctant to work in facilities located near areas of racial unrest.

Brian Devine, division vice president of Prologistix, one of the nation’s top warehouse staffing firms, said prospective workers have cited all those issues as influencing their decisions whether to apply for warehouse work this season. The expected surge in demand, especially from e-commerce, will amplify the need for qualified labor and the pay scales required to attract them, Devine said. It will not be the trigger, he added.

Another issue that might constrain labor availability is that laid-off workers living in urban areas may not want, or have the means, to travel to out-of-the-way locations where businesses often locate their warehouses because of more available land, said David Glick, who spent 20 years at Inc. (NASDAQ:AMZN) and is today chief technology officer at Flexe, an on-demand warehousing provider.

Before COVID, Prologistix projected the average hourly peak wage in 2020 to settle at $15.50, which is a continued escalation over the past 10 years. Now, it will take at least $19 an hour to get workers interested, Devine said.

In a sign of what may be to come, Uline Inc., which sells shipping and other business supplies, posted a position on the employment portal offering $23 an hour for an unspecified warehouse job. Uline also offered a $6,000 sign-on bonus to be paid in December if the successful applicant starts Oct. 1, according to the post.

Michael Mikitka, who spent 12 years as CEO of the Warehousing Education & Research Council (WERC) and is now a top executive at MHI, the material-handling trade organization that acquired WERC last month, said warehouse wages may hit $20 an hour in some markets, and may exceed that threshold in more “challenging” markets. “Look for warehouse operators to get very creative in how to manage these increased labor costs,” Mikitka said, without elaborating. 

The economic fracture caused by COVID-19 did not suddenly change the outlook for available labor, Mikitka said. Based on conversations with warehouse executives, “experienced and well-trained warehouse operators were already in short supply in most markets pre-COVID,” he said.  

Bring on the jobs

The seasonal hiring has begun, or at least has been announced. UPS Inc. (NYSE:UPS) said Wednesday that it plans to hire up to 100,000 seasonal workers this peak, the same number it planned to hire in the 2019 peak. Rival FedEx Corp. (NYSE:FDX) said it will add about 70,000 seasonal jobs to its ground-delivery network. FedEx also plans to expand its Sunday delivery service to cover 95% of the U.S. population, and its less-than-truckload (LTL) delivery service, FedEx Direct, to 90% of the populace. Both changes will take effect in the next three to four days, the company said.

DHL Supply Chain, the supply chain division of Deutsche Post DHL, plans to hire about 7,000 seasonal workers in North America, said Kraig Foreman, president, eCommerce, of the unit’s North American business. Foreman agreed that hiring patterns will be strongly influenced by the extraordinary events triggered by the pandemic.

“We anticipate that labor availability will be impacted both by the level of government stimulus provided over the coming weeks and by the dynamic that COVID-19 takes across the country — in terms of both the direct effect on staffing in areas with outbreaks, and the indirect effect on people’s potential concerns about going to work,” Foreman said in an e-mail. 

The DHL unit will offer “competitive” wages on a market-by-market basis, Foreman said, adding that he expects higher pay mostly across the board. The unit plans to aggressively target its hiring at industries hardest hit by the pandemic, he said.

Amazon controls about 44% of the U.S. e-commerce market, and often sets the benchmark for warehouse labor rates. There are frequently told stories of Amazon entering a market and vacuuming up as much available labor as possible, leaving rivals to pay higher rates to attract who’s left. Amazon typically pays a $15 minimum wage, so that is likely to be the baseline for warehouse labor across the industry, said Glick.

The months to come will be one for the record books. According to data from the U.S. Census Bureau, e-commerce sales accounted for 16.1% of total retail sales in the second quarter of 2020. On a non-adjusted basis, the estimated second-quarter total for U.S. e-commerce sales was $200.7 billion, an increase of 37% from the first quarter and up 44.5% year-over-year. Under the current conditions, no one expects those trends to head in the opposite direction. Amazon said several months ago that it has run out of physical space to handle surging volumes, and that it needs to boost its across-the-board capacity by 50% by the time peak arrives in November.

The continued tight conditions for labor and for available space will create opportunities for an on-demand warehousing model like Flexe’s, said Glick. That’s because companies coping with extraordinary volume surges don’t want to commit capital to long-term warehouse leases because they don’t know if their volumes will remain high, he said.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.