Tightening labor market partially responsible for rising warehouse rents - Sep 2016

Tight labor market partially responsible for rising warehouse costs

As the business of e-commerce soars and demand for warehouse spaces increases at a rapid rate, so do warehouse rents, from a logical standpoint. However, an often-unconsidered factor in logistics industry prices is the current United States labor market.

Current state of the general U.S. labor market:

Employers nationwide are feeling the crunch of a tight labor market; manufacturing job openings are the highest they have been in 15 years, according to a Sept. 1 article by the Wall Street Journal.

Its an employees market right now, with lowest-rung workers like entry-level material handlers and unskilled laborers securing pay raises as companies struggle to compete for labor, and minimum wages across the country increase. A May 31 article by the Wall Street Journal detailed the actions large employers like McDonalds and J.P. Morgan Chase and Co. are taking to attract more qualified candidates and retain high-performing people.

Skilled labor is also at a premium and difficult to find, especially in the manufacturing environment. A May 2016 Accenture study found that 55 percent of manufacturers report a major skills gap between the technologies available in their manufacturing businesses and the ability of current employees to use the technologies, including 3D printers, plant floor modeling and simulation tools and predictive maintenance analytics.

Current state of the U.S. logistics industry labor market:

The trucking industry in particular is hard-pressed to find qualified, dedicated drivers who wish to dedicate many hours to their employer behind the wheel an exhausting, risky and potentially health-endangering job. A 2014 Kent State University study stated: 

Commercial truck drivers experience all four occupation?related risk factors for obesity: sedentary lifestyle, poor opportunities for regular, healthy meals, and irregular hours and sleep schedules. Consequently, truck drivers have a life expectancy of 61 years, 17 years less than the national average."

This sad and scary truth has prompted carrier associations to seek other solutions for the worsening trucker shortage. In late August, the Federal Motor Carrier Safety Association (FMCSA) proposed a program that would allow employees as young as 18 to operate commercial motor vehicles like semitrailers for both full-truckload and LTL shipments as long as they have completed the appropriate certification for licensing.

On the warehousing side of the logistics industry labor market, handling rate increases are due to the same tightening labor market factors. While WSI strives to provide a happy, healthy, safe and inclusive environment for all its employees and maintains a lower-than-industry-average turnover rate, the turnover rate for entry-level material handlers is still, expectedly, high. Additionally, increasing insurance premiums are an element in labor cost increases nationwide. WSI experienced a 6 percent health insurance premium increase for 2016, with an expected 10 percent increase in 2017:

By coordinating with leadership within our company and keeping wages competitive to attract the best possible employees, WSI demonstrates its commitment to assuage the tight labor market it faces and keep prices reasonable for its customers. However, the current state of the real estate industry and labor market means increases in distribution costs all over the nation. Higher warehouse rents, wage rates and insurance costs are the new normal, but, on a positive note, the increased business our customers are experiencing should offset the higher rents. Know of a hardworking, smart, detail-oriented person who is interested in a logistics career? Were hiring! http://www.wsinc.com/employment-opportunities.html

Rob Kriewaldt
Director of Client Solutions