Iowa Businesses Cope with Continued Shortage in Available Labor

September 20, 2021

The Gazette, John Steppe 

When Doug Hundt hosted some guests at Vermeer Corp.’s headquarters in Pella recently, he called the nearby restaurant George’s Pizza and Steakhouse to order some food.

“They said, ‘You can order a pizza and salad,’” said Hunt, president of industrial solutions for the industrial and agricultural machines manufacturer.

“And that’s it.”

The reason? Not enough workers.

More than three months after the end of Iowa’s participation in federal unemployment programs — halted early by Gov. Kim Reynolds — businesses still are struggling to hire enough workers to keep up with customer demand as the state and national economy reopens.

“Everyone is hiring,” said Rebecca Weinbrenner, co-owner of Dash Coffee Roasters in Cedar Rapids. “So if it’s not like the perfect job, why not jump ship and do something else?”

About half of Dash’s sales come from orders for food made in its kitchen, Weinbrenner told The Gazette. But the Cedar Rapids coffee shop had to close its kitchen for a time, citing staff shortages.

“It’s tough to find people who want to work in kitchens,” said Weinbrenner, who has raised employee wages during the labor shortage.

The kitchen will reopen Monday after a new cook starts. Front-of-house positions remain competitive and get filled “pretty quickly,” though.

“Everybody wants to be a barista,” Weinbrenner said. “It’s like the fun job.”

Vermeer Operations Vice President Bill Blackorby said his company has broken records for sales volume since 2018, but as with other businesses, the agricultural equipment manufacturer has experienced challenges hiring enough staff.

“Our biggest constraint right now is trying to get the available labor,” Blackorby said.

Brian Flynn, the co-owner of 30hop, Blackstone and other restaurants and bars in the Corridor, said hiring has been an issue for longer than a year, although his downtown restaurants and bars “haven’t had as much trouble” as other locations.

“We’ve got plenty of customers,” Flynn said. “It’s just a matter of how often we’re able to serve in a manner that is respectable to our business as well as to them.”

While many other industries in Iowa have returned to pre-pandemic levels of employment, the state’s leisure and hospitality sector had 12,400 fewer people employed in July 2021 than in February 2019.

“Some people have changed life paths and decided they don’t want to be in the hospitality industry anymore because there are a lot of other opportunities out there that people can find,” Flynn said. “We’re not just battling with our own industry anymore. We’re battling with every industry.”

Flynn’s restaurant group hired a human resources company to recruit workers, which came with its own challenge.

“Without even knowing it, they were recruiting people from our other restaurants to try to work in another restaurant that we already own,” Flynn said.

The shortage in job candidates has added competition among employers as well as opportunities for employees.

"Other companies … I don’t want to say they’ve tried to pillage us, but we’ve had a lot of people come after our people,“ Flynn said.

Populous counties see more job openings

Iowa Workforce Development Director Beth Townsend pointed to the state’s 66,000-plus job openings at the time of Reynolds’ decision to end Iowa’s participation in the federal unemployment benefits.

But the number of job postings in Iowa have increased since then. As of Thursday evening, the IowaWorks database listed more than 85,000 job postings.

Many of those openings are concentrated around urban areas. Iowa’s four most populous counties — Polk, Linn, Scott and Johnson — are home to 44.2 percent of the postings.

Every Iowan who filed for unemployment in the week that ended Sept. 11 would need to work about seven jobs to fill all the advertised job postings, according to preliminary data from IWD and analyzed by The Gazette.

Peter Orazem, an Iowa State University economist, studied each state’s labor force recovery by looking at changes in labor force participation and employment between July 2019 and July 2021.

States that yanked federal unemployment benefits early have seen better labor force and employment levels compared to 2019, Orazem said, “but (that’s) not something that’s really that dramatic so far.”

It’s also hard to know whether the termination of the federal unemployment benefits was the reason for the relatively good standing, he said.

“The states that eliminated the $300 supplemental benefit in June generally, on average, are doing better than the states that are going to be losing the $300 supplemental benefit in September, but they were already doing better,” Orazem told The Gazette earlier this month.

“There’s a whole set of policies that differ between the more- and less-restrictive states.”

Iowa was the least economically restrictive state during the pandemic, according to data Orazem pulled from the personal-finance website WalletHub. But Iowa’s recovery has not been as strong as other states that were relatively less restrictive.

Orazem said the relationship between economic restrictions and a state’s workforce recovery is an “inverse U.”

“If you’re way at the upper tail like Iowa, you're actually not doing as well as some of the states that are a little bit more restrictive,” Orazem said. “I think part of it is if you’re absorbing a pandemic surge, it actually retards some of your economic growth.”

IWD spokesman Jesse Dougherty said the agency believes "it’s too early to understand the full impact of the June 12 decision“ to end federal benefits.

The agency has seen an increase in visits to IowaWorks offices, though. In-person visits increased from 1,903 in May to 5,220 in June, according to data Dougherty provided to The Gazette.

IowaWorks also had 3,438 virtual visits in June — an opportunity not available earlier in the pandemic.

Dougherty also pointed to Iowa’s seven consecutive months of growing its civilian labor force. However, the labor force still has 66,952 fewer workers than in February 2020.

“We have this sort of puzzling, unusually large reduction in labor force in Iowa, compared to states that you would think are roughly the same,” Orazem said, referring to neighboring Nebraska and South Dakota.

While those seeking work and unemployment benefits are supposed to be included in the civilian labor force, Orazem said different data collection methods means it’s possible for people to say they’re not seeking work and apply for the federal benefits.

Joe Murphy, executive director of the Iowa Business Council, agreed with Reynolds’ decision to end benefits in May and still supports it, citing the recent increases in labor force participation.

Murphy said the cutoff of federal unemployment benefits was never supposed to be a “silver bullet” in resolving Iowa’s workforce shortages.

"We need to be doing all sorts of different things, including going out of the state and recruiting more individuals into Iowa, and being a welcoming and inclusive place for all individuals to try to increase our population and try to increase our workforce base,“ Murphy said.

The Iowa Business Council, which represents 22 of the state’s largest employers, views workforce as the top issue facing Iowa businesses. It has advocated for immigration change as a way to alleviate Iowa’s shortage in available labor.

“We believe strongly that our immigration laws need to be updated and brought into the 21st century,” Murphy said. “It's long overdue.”

Should the workforce shortage persist in Iowa, the state could face long-term consequences.

“If this shortage continues and persists in the long-term, Iowa companies will look elsewhere to expand,” Murphy said. “That’s something we certainly want to avoid.”

The labor shortage has caused some business leaders to take a closer look at the culture at their companies.

Flynn’s restaurant group has been “hyper-focused” on avoiding burnout, offering optional fun activities on days when employees aren’t working.

“We’ve done days where we had like an employee get-together and did a picnic outside,” Flynn said, “or went to a brewery tour at one of our other places.”

Even after the worker shortage is over, Flynn expects the increased focus on company culture to stick around.

“We want them to have a good work-life balance, and we had a good concept of that before,” Flynn said. “We really had to improve on that, and I think it's really made us change our mindset even more so.

“I would have given us a B-plus or A-minus before COVID, and I’d probably give us an A or A-plus now.”

Vermeer officials believe the “people-centric,” “family environment” is why about 40 percent of hires over the past year have been the result of referrals from existing employees.

“It’s a struggle, but we do continue to add people,” said David Corbin, Vermeer’s chief information officer and vice president. “The culture aspect of it is vitally important, so we work really hard to maintain that.”

Many employers also have turned to raising wages to lure potential workers. Murphy said IBC’s members, which vary from Casey’s General Stores to Collins Aerospace, almost entirely pay more than double Iowa’s $7.25 minimum wage.

“Outside of maybe a teenager bagging groceries at Hy-Vee or Fareway, we’re all paying well above $15 per hour for hourly employment,” Murphy said. “Those wages are continuing to be pressed upward given the competitive nature of the economy right now.”

Higher wages come at a higher cost, though.

“At this point, break-even business sometimes gets really challenging,” Flynn said.

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