Daniel Shedd has always made it a point to offer competitive wages to the workers of his Warren manufacturing company, but what he used to think of as competitive is no longer enough.
Prior to the pandemic, Shedd offered a starting pay that was $1.50 above the state’s minimum wage – a reflection of the precise yet delicate craftsmanship at the heart of Taylor Box Co.’s business model.
“What we make here is a high-end, highly detailed, craft-oriented product,” said Shedd, the company’s president. “There is a large human factor, and when that human factor is a priority, you have to be competitive at entry-level wages.”
These days, that requires a new calculation. Labor shortages, rising costs of goods and new expectations around remote work – an impossibility for most manufacturing jobs – forced Shedd to boost pay once, then again.
As of Jan. 1, starting hourly pay at Taylor Box was $15 an hour – $2.75 more than the state’s $12.25 minimum hourly wage.
Apparently, others are making similar decisions. Over the last year, workers’ hourly pay has increased by 4.8% on average, according to November data from the U.S. Bureau of Labor Statistics.
Good news for workers? Yes.
But also no.
When adjusted for inflation, real hourly wages are down 1.9% from a year ago, and 1% less than February 2020, before the onset of the COVID-19 pandemic, according to BLS data.
‘Our margins have fallen, business has fallen. It’s tough out there.’
DANIEL SHEDD, Taylor Box Co. president
It’s a losing scenario for both workers and their employers, and one that economists expect will only grow worse in the coming year as inflation rises and labor and supply chain shortages continue.
“There’s a big risk for hyperinflation,” said Edinaldo Tebaldi, an economics professor at Bryant University. “It creates this bad cycle where higher increases in prices lead to workers asking for higher wages and the increase in wages leads to producers increasing their prices.”
Unlike in prior bouts of wage inflation that largely applied to “undesirable” lower-wage jobs, this time around it’s also hitting employers who were already paying their workers above-market rates, said Laurie White, president of the Greater Providence Chamber of Commerce.
“That’s the conundrum,” she said.
Add in cost pressures on materials and supplies, and many employers are feeling the pinch more than ever.
“You worry about economic relevance,” Shedd said. “Our margins have fallen, business has fallen. It’s tough out there.”
Similar concerns are playing out at Thielsch Engineering Inc. The Cranston-based engineering consulting firm has hiked hourly wages across departments, particularly for entry-level positions where competition is fierce, said Stephen Dolinich, manager of talent acquisition.
“That’s our pain point,” he said of entry-level jobs. “You could take a job at Dunkin’ Donuts, Amazon, you could go anywhere.”
Dolinich declined to say how much the company had increased wages over the course of the pandemic or what is the current starting pay. But the pace of increases is faster than he has experienced in his seven years at Thielsch.
And while it has helped ease some hiring pressure for those entry-level jobs, the relief may not last if those offers stop becoming attractive as inflation rises.
“Some managers are saying, ‘I don’t think I can go higher and still turn a profit,’ ” Dolinich said of starting pay.
While Dolinich sees workers in the driver’s seat, that’s not always the case.
Therese Sloane, a store leader for Ocean State Job Lot, has gotten several pay increases as part of annual performance reviews during her 3½ years with the retailer. But now, she’s spending more on day-to-day expenses: utility bills for her Warwick home, filling up her car with gas for drives to visit family in Massachusetts.
For now, Sloane says she’s not worried. She owns her home, has a second income from her wife and doesn’t have children. But thinking about rising costs doesn’t exactly put her at ease.
“Talking about this now is just kind of bringing it to the forefront of my mind,” she said.
Recognizing the cost burdens faced by its workers, Job Lot has tried to increase benefits other than just pay: adding 10% to the employee in-store discount on designated shopping days, paying for life insurance and upping the number of free lunches for corporate and distribution office workers from one to two per week, said Bob Selle, the chief human resources officer.
In a similar vein, Thielsch Engineering offered an employee health insurance plan with no payroll deduction for the first time this year, Dolinich said.
But these gestures, too, can cut into employers’ profit margins, leading them to hike prices and worsening the wage-price spiral that is already beginning to take hold. How long conditions will last and how bad they’ll become is hard to say, Tebaldi said.
Tebaldi referenced a similar situation that played out in his native Brazil in the mid-1980s when inflation reached close to 2,400%. The 6.2% inflation the U.S. reported in October is nowhere near that, but Tebaldi was confident it was going to get worse before it got better.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
