Anneliese Vance-Sherman, chief labor economist with the Washington Employment Security Department, recently spoke with The Shelby Report about the workforce challenges retailers are facing in the state.
How would you summarize the retail workforce situation in Washington state?
The overall job market, while showing a slight slowdown after recovering from COVID-19 pandemic job losses, remains favorable for job seekers, with unemployment consistently in the low to mid 4 percent range since 2021.
However, labor force participation continues its long-term decline, now below 63 percent, largely due to an aging workforce and Baby Boomer retirements.
What are the most significant labor market challenges facing retailers?
Washington’s retail and grocery sectors, often serving as entry points into the labor market, face persistent challenges in attracting and retaining staff.
Due to lower training thresholds and often lower wages, these businesses are in constant competition for workers. Employees in these roles are particularly sensitive to incentives like wages, hours and schedule flexibility, and are more likely to move between jobs in response to these factors.
This price competition is amplified by current low unemployment rates and a slowly shrinking labor force participation rate. This combination creates a job market historically favorable for job seekers, intensifying employer competition for talent.
These challenges are generally consistent across different regions and business types within the retail and grocery sectors, as the underlying dynamics of entry-level employment and labor supply affect the industry broadly.
Have Washington consumers escaped the economic pressure others in the country are experiencing?
Everyone feels the effects of inflation. In a way, the grocery store is a touchpoint that all of us experience and is therefore a common informal gauge that people have for the health of the economy.
Inflation increased substantially in the immediate aftermath of the pandemic, affecting food prices among others. In the intervening couple of years, inflation has cooled substantially, but people are more likely to remember the cost of their groceries before the large spike in inflation than they are to hone in on 12-month changes. Price increases affect household budgets and lead to tradeoffs in spending decisions.
On average, wages increased similarly to prices – but averages mask individual and household level dynamics. The largest wage increases tend to occur at the very upper end and at the very lower end as minimum wages in Washington state increase every year because our minimum wage is indexed to inflation.
Consumer spending habits benefitted retail during the pandemic. Households that were able to continue working had fewer options available for spending money. Dollars that would have been spent traveling or eating out were spent on goods.
For higher income households, this could mean increasing spending on home improvements and entertainment. For lower income households, expanded unemployment insurance benefits and other economic boosts put in place during the pandemic made it possible to continue shopping for groceries.
What will be the defining workforce trends in Washington’s retail and grocery sectors in the next decade?
I expect to see a continuing evolution of technology and a need for a workforce that can balance the need to deliver good face-to-face customer service and interface with different operating systems and technologies.
Some workforce tasks will be replaced by technology, but grocery stores continue to be a service that necessarily serves all people, regardless of their level of familiarity with technology and regardless of culture. The ability to work with people will continue to be critical.
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What are some of the most surprising shifts you’ve observed in the workforce?
I think the most surprising swing was the temporary shift we saw when youth employment actually increased during an economic downturn. That never happens.
Youth labor force participation tends to be relatively low, but the unemployment rate for youth tends to be high, which means many are not looking, but those who are looking in earnest are having difficulty. Youth employment could be an opportunity retailers can tap into.
How might the demographic shifts in Washington impact workforce availability going forward?
With lower birth rates and lowering labor force participation rates (a reflection of an aging population), workforce availability will be constrained. The Economic and Revenue Forecast Council anticipates a low unemployment rate for the near future – largely a reflection of the smaller labor force.
Employers in grocery retail will need to plan accordingly. This will likely mean a combination of strategies that include increased technology investments (high fixed costs, but less variable than labor), careful consideration of staffing by time of day, etc., exploration of self-serve options and investigating strategies to increase retention.