Last week, Seattle approved the nation’s highest minimum wage: $15 an hour, to be phased in over the next seven years. Other major cities, including San Francisco, Chicago, and New York City, are debating similar increases, and President Obama has called for an increase in the federal minimum wage from $7.25 to $10.10 an hour.
A report from the Congressional Budget Office found that boosting the federal minimum wage would provide $5 billion a year more for families living in poverty and $12 billion a year more for families earning from one to three times the poverty threshold.
Opponents of the proposal say it would cost businesses too much, requiring them to raise prices, and ultimately end up reducing total employment by 500,000 workers by the second half of 2016.
But what if there were a way to pay for minimum wage increases without automatically increasing consumer prices?
Now is a good time to look at the hidden costs of recruiting and hiring hourly-wage workers.
First, some background about the hourly jobs market: The 75 million U.S. hourly workers make up about 59 percent of the workforce, forming a key pillar of the economy. The retail and hospitality sectors represent close to one-third of these jobs, and that share is growing. The U.S. Bureau of Labor Statistics forecasts that the retail sector alone is expected to add more than a million jobs in the coming decade, reaching nearly 16 million positions by 2022.
Growing the workforce while significantly increasing wages is a complex challenge for any business, especially when the market served by that business cannot support increased prices. But there are hidden costs that businesses can eliminate with the help of technology to partially offset the cost of wage increases.
Hourly employees are arguably the face of most businesses, and yet they represent the most challenging labor segment in terms of recruitment costs, constant turnover, and unplanned absences. Various research studies estimate that the cost of hiring a new or replacement hourly worker is 30 to50 percent of the worker’s annual wages.
The Aberdeen Group has estimated that average turnover can range from more than 50 percent for line-level hotel and motel employees, to 104 percent for specialty stores, to more than 200 percent annually in fast-food chains. The dual impact of attrition and economic growth means that employers in the United States need to make over 50 million hires every year in the hourly jobs sector.
With such a large number of hires per year, inefficiencies in the recruitment process add up. Businesses devote more than one billion hours a year to processing close to a billion job applications at a cost of more than $30 billion. These inefficiencies also result in unnecessary delays for job seekers.
There are several underlying causes for this. One big one is a disconnect between how employers and job seekers use technology. While 70 percent of the hourly wage workforce prefers to use mobile devices, less than 20% of employers are truly ready for mobile job applications.
Inefficiencies are compounded by manual processes, time-consuming pre-screening phone calls, paper-based job applications from walk-in applicants, and lost productivity. The average store manager in the retail and hospitality sectors spends eight hours conducting pre-screening interviews for each open position, with much of that time wasted on candidates that aren’t the right fit.
This time could be spent selling more, servicing more customers, training the workforce, and growing the business, which, ultimately, results in more jobs.
At Jobaline, we have passion for this beautiful country that we proudly call home, and we have passion for technology. We have proven that our solution helps to partially address these inefficiencies that cost billions to the companies hiring hourly-wage workers.
Improving the process of promoting job openings and attracting qualified candidates could significantly cut down on that billion hours spent annually to recruit and hire hourly workers.
This would certainly generate substantial savings that could be used to pay for wage increases or business growth, leading to more jobs.
