Wage surge hits Michigan businesses as they struggle to fill jobs

Kalea Hall
The Detroit News

Detroit — Like many Michigan businesses, Penna's has had to boost wages to get workers in the door, but even so the Sterling Heights banquet hall could still use another 15 employees to staff events. 

"I'm booking less counts, telling parties that I do every year, 'I'm sorry, I can't go over a certain amount,' so it's almost turning away business," Mary Lou Penna said of the family-owned business, which has increased wages from $12 to $14 per hour to start.

Penna's is far from alone. Nationally, wages and salaries jumped in the three months ending in September at the highest rate in records that date back 20 years as companies struggle to fill a near-record number of available jobs.

Pay increased 1.5% in the third quarter, the U.S. Labor Department said Friday. That’s up sharply from 0.9% in the previous quarter. The value of benefits rose 0.9% in the July-September quarter, more than double the preceding three months.

Pay has also been on the rise in Michigan. The average hourly rate in September for employees working in private industry was $29.03, up from $28.84 in August and $27.60 in September 2020, according to data from the U.S. Bureau of Labor Statistics. 

The increases show how businesses across a variety of sectors had to make changes to attract new employees after COVID-19 disruptions pushed workers to demand higher pay, better benefits and more flexible schedules before returning to offices, factories and other job sites. 

"There's a lot we don't understand about the current experience," said James Hines, professor of economics and law at the University of Michigan. "We're not sure why there are all these labor shortages right now."

There's a list of "speculations" about the shortage, Hines said, from employees having to stay home with children and dropping out of the labor force to people deciding they didn't want to go back to their jobs after the pandemic kept them home for weeks, if not months. 

"What we don't know is for the economy as a whole, what are the big drivers and what is it going to look like when things settle down?" Hines said. "We haven't quite settled down yet."

The Columbus-based White Castle restaurant company didn't wait for the labor market to settle down to up wages in the Detroit area. Beginning in April, White Castle increased pay from $11.50 per hour to $15. Employees also get free meals when on the job and they get a 10% discount on food they want to take home to friends and family. The restaurant also brought hourly wages up at its Columbus-area restaurants to $15. 

"We realized earlier this year that there was starting to be a trend in terms of not having as many people on the team as we wanted," said Jamie Richardson, vice president at White Castle. 

The move raised White Castle's staffing by 150 in Detroit and enabled the fast-food chain to keep its restaurants open longer. 

"We just realized that talk about a labor shortage was increasingly becoming a reality for us as the year went on and we saw that around the country, but we're really thankful we made the investment we did in Detroit," Richardson said. 

Higher inflation is eating away at some of the wage increases, but overall pay is keeping up with rising prices, at least in the short term. The 1.5% increase in wages and salaries in the third quarter is ahead of the 1.2% rate of inflation during that period, economists said.

Compared with a year ago, it’s a closer call. In the year ending in September, wages and salaries soared 4.2%, also a record gain. But the government also reported Friday that prices had increased 4.4% in September from a year earlier. Excluding the volatile food and energy categories, inflation was 3.6% in the past year.

Millions of Americans are responding to rising wages by quitting their jobs for better-paying positions. In August, nearly 3% of American workers quit their jobs, a record high.

"I believe in the American economy. I really do, and I think in the end ... firms are going to pay them and people are going to work," Hines said. "That's what's gonna happen. 

"If an employer really needs employees, there exists a wage at which you can usually get people, but whether you can afford to pay that wage, that's a different question."

Workers who switch jobs are seeing some of the sharpest income gains in decades. According to the Federal Reserve Bank of Atlanta, in September job-switchers saw their pay jump 5.4% from a year earlier — the biggest increase in nearly 20 years. By comparison, new hires in May averaged 3.4% higher pay.

Lower-income workers at restaurants, bars and retail stores are seeing some of the largest income gains, but the wage increases are spreading. According to Oxford Economics, the proportion of jobs receiving a monthly pay rise of 0.5% for six months has jumped to 40%, from about 9% before the pandemic.

In Michigan, where manufacturing is a prime economic driver, weekly average manufacturing wages in September 2021 were $925.85, up from $907.08 in September 2020, but down from August's $942.98. 

 At Southfield-based IMPACT Management Services staffing agency, the bulk of the business is in manufacturing for the automotive industry. Brad Parsel, director of business operations, said all clients have had to increase their wages.  

"You're looking at jobs that two years ago ... they were $10 to $11-an-hour jobs, $10 to $12 an hour. All those jobs are now $15 to $17 an hour," he said.

"We had a lot of companies that were running in the manufacturing industry 50 to 60 people short from time to time. Without raising those wages, they were never going to get the people in the door to get caught up on production."

khall@detroitnews.com

Twitter: @bykaleahall

Associated Press Writer Christopher Rugaber contributed