Worcester workers have bargaining power, expect higher wages during pandemic

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Starting January 1, some workers could see the highest annual base pay increase in 14 years.

LEOMINSTER — The coronavirus pandemic not only resulted in vaccination requirements and mask mandates.

It also created a boon for some workers in the form of higher salaries.

A severe labor shortage attributed to the pandemic means some businesses are paying staff more greenbacks so they don’t jump ship for a higher-paying job somewhere else.

That could easily happen because there is a load of job openings out there.

At AIS Inc. in Leominster, officials at the commercial office-furniture manufacturer boosted salaries roughly 10% for entry-level factory workers, said Bruce Platzman, chief executive officer at AIS.

The increase applies to both new and existing workers and it’s significantly higher than an expected average 3.9% base pay increase nationally in 2022, according to a survey by the nonprofit The Conference Board.

“There is a lot of competition at the lower-end scale for entry-level positions,” said Platzman.

One development Platzman noted that is contributing to the competition — and rising salaries — is the explosion of Amazon distribution warehouses in Central Massachusetts.

Another local company that appears to have raised wages because of the pandemic’s labor shortage is Polar Beverages. Chris Crowley, Polar executive vice president, mentioned a sign in the company’s shipping area that advertised up to $17 hourly for new workers.

“The starting wage is higher than it used to be,” said Crowley. “It’s about employee retention.”

Heavy competition

There’s a lot of competition for a dwindling labor pool and worker retention is the name of the game for many companies during the pandemic. To keep workers, companies have to pay them more.

The Conference Board survey highlights the development.

A global, independent, nonprofit business membership and research association, the Board surveyed its members on how much they expect to increase base pay in 2022.

The result is eye-opening – an expected average increase of 3.9% in 2022, the highest yearly hike in 14 years.

It should be noted that of the board’s several thousand members worldwide, only 240 responded to the survey. Of the 240, all are located in the U.S. and more than half are companies with 10,000 or more employees.

Some of the Worcester area’s largest employers, including the Hanover Insurance Group, Fallon Health, Saint-Gobain and Waters Corp., declined a Telegram & Gazette request for comment on the expected 3.9% hike.

Two developments likely explain the percentage, said Gad Levanon, a Conference Board vice president. One is what Levanon called a “very hot” labor market that resulted in significant wage growth.

Another factor is rising inflation, so salaries had to increase so workers could afford to purchase goods and services.

Levanon confidently linked the pandemic to inflation. As for wage growth, it existed before the pandemic, he said. But it accelerated with more workers choosing to remain unemployed during COVID-19.

Supply and demand

Robert Bauman, an economics professor at the College of the Holy Cross, breaks the issue down to supply and demand.

There are 6 million fewer workers nationwide, compared to pre-pandemic levels, according to the U.S. Bureau of Labor Statistics. As a result, jobs are going unfilled and workers realize they can demand more money from employers.

“One way to look at this is workers have a little more bargaining power right now,” Bauman said.

Bauman noted the labor shortage is a protracted one, having dragged on for months. Employers realize they can’t wait out the problem, so they must hike salaries to retain workers and attract new ones.

“It’s an issue of supply and demand to me,” Bauman said. “With a lower supply of workers, you have to raise wages for everyone else.”

Bauman hasn’t put his finger on what is causing the labor shortage. It could be workers electing to stay home so they’re not potentially exposed to COVID-19. Or maybe it’s dissatisfaction with the job they had before the pandemic hit.

“It’s hard to say what it is. Something changed in the pandemic,” Bauman said.

Morale problem

There is also a morale problem that could be an unintended consequence of the labor shortage. Veteran workers may not like newbies coming in and earning a salary that equals or comes close to theirs.

If those veteran workers feel disrespected, they could leave for a higher salary at another company. The result is an experience drain that could severely impact a company’s productivity.

“No question about it,” Bauman said to acknowledge a potential morale problem. “It’s why a lot of firms have to pay everybody more.”

Keeping workers happy

Platzman hopes the 10% base-pay increase offered by AIS will attract factory workers. But that extra cash payout stings the bottom line, along with overtime paid to existing factory staff to make up for unfilled jobs that Platzman said number several dozen.

But Platzman is somewhat optimistic. If the labor market eventually rights itself, and the cost of commodities — like steel, copper and aluminum — that AIS needs for production continue to level off, the company’s balance sheet will be in a strong position.

But there are big unknowns here, so Platzman said AIS needs to charge customers more for its products in order to cover increased labor and materials costs.

“Customers used to go crazy,” Platzman said of higher prices. “But prices are up dramatically in this industry. Everyone is raising prices.”

Contact Henry Schwan at henry.schwan@telegram.com. Follow him on Twitter @henrytelegram