How Are Minimum Wage Changes Impacting the Warehouse Industry?

While the federal minimum wage has remained steady at $7.25 per hour since 2009, individual states, counties, and cities across the United States are increasingly undertaking initiatives to raise the minimum wage for all employers in their areas. Cities like Los Angeles and areas like SeaTac have been leaders in raising the minimum wage to $15 an hour, and several other areas — and even individual companies — have declared plans to do the same soon.

Zeroing in on how these minimum wage changes are impacting the warehouse industry is a bit of a tricky prospect, as many of those impacts are secondary and based more on correlation than direct causation. That being said, staying aware of wage trends is going to become more and more crucial for warehouse managers over the next few years, not only for managing their own labor, but also for understanding how these changes affect their supply chain as a whole.

Potential Changes to the Supply Chain

In a direct sense, recent rises in state- and city-level minimum wages hasn’t had a tremendously noticeable impact on individual warehouses, since less than 1 percent of warehouse workers are currently paid at the minimum wage — even for entry-level positions. However, warehouses with average starting pay rates of $11 to $12 an hour will likely need to adjust their labor budgets in the near future, since $15 an hour looks to be the standard by which most wage-raising initiatives are set.

More immediately, minimum wage hikes are already leading to higher prices and service costs from suppliers in certain areas, as well as relocations away from cities with higher minimum wages to more rural wages that adhere to looser state or federal standards. This trend of manufacturers clustering in areas with lower minimum wages — which, it should be noted, will likely continue to shrink over time — could spread to warehousing soon. This could leave unprepared managers struggling to find quality labor as a result, since their starting wage would be much closer to the mandated minimum.

A Positive Correlation with Workplace Productivity

To some extent, a national rise in the minimum wage could end up providing a net benefit to both warehouse workers and warehouse managers. Higher wages are correlated with better employee retention and more productive workers in virtually every industry, so ultimately, a small increase in pay and/or benefits could lead to a significant decrease in onboarding costs and other labor-related expenses.

If it’s feasible for your business, though, it’s best to start planning ahead for more minimum wage increases, so you can maintain flexibility in the face of increased competition for new hires. While warehouses have something of a natural advantage over other industries in terms of initial wage offers, that advantage may disappear sooner than you think.

Looking Toward the Future

Perhaps the biggest unknown factor when it comes to how minimum wages changes will affect warehouses and warehouse workers is automation—not whether it will happen, but rather how fast it will overtake demand for labor. Increased automation in 21st-century warehouses has allowed for astounding increases in production capacity, but it also creates wage stagnation when more human workers are competing for fewer and fewer available jobs.

On top of that, seasonal demand surges still create a need for flexible human labor, but that isn’t readily available in the current system, where the average turnover rate for warehouse workers is 36 percent. To address these kinds of labor shortages, it may be best for you to turn towards short-term flex labor solutions like HapiGig, so you can bring in high-quality on-demand labor on a gig-by-gig basis, without sacrificing control of your financial future.