Heaven help me, I agree with a McDonald's executive

It’s September 14, 2022. Here’s the rundown:

• Labor hoarding — it’s a thing now?

• Heaven help me, I agree with a McDonald’s executive

• Numbers and links

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Labor hoarding — it’s a thing now?

Like “quiet quitting,” “labor hoarding” is a new term that some people are using to describe existing things.

Image: BLS data via TKer

You’ve heard of “quiet quitting,” now get ready for “labor hoarding.”

I came across a recent story from Inc., which discusses that there are companies out there that are “labor hoarding,” in that they are not laying employees off despite tough economic headwinds — instead, they’re keeping their employees on board so as to avoid the higher long-term costs of finding new talent and training them when the economy is a bit better.

It’s so crazy that it makes perfect sense.

From the Inc. piece:

KPMG chief economist Diane Swonk, former chair of President Obama's Council of Economic Advisors Jason Furman, and others describe a trend in which employers decide to ride out the uncertainty with higher payrolls--in order to avoid the long-term costs of hiring and training new people when the economy rebounds. Labor hoarding marks a shift in business owners' go-to strategic response to recessions--namely, cutting your labor force to preserve short-term profits.

"As the cost of losing people to layoffs and firings has grown, the number of layoffs and firings has fallen," says Julia Pollak, chief economist at ZipRecruiter. "Labor market dynamics have fundamentally changed: time-to-hire, recruiting costs, and hiring costs have all grown substantially." And while layoffs are low, employees are still quitting at a high rate. That means companies are "already generating vacancies more quickly than they'd want, and their hiring processes are struggling to keep up," says Pollak. (You can read a full rundown of labor hoarding in Sam Ro's website TKer.)

The story goes on to discuss that employers are having a hard enough time already finding employees — something we’ve discussed here many times — for a variety of reasons. That has made many layoff-happy companies go easy this time around, and instead, keep people around. And it looks like we’re going to call it “labor hoarding.”

I don’t know how much evidence there is for this phenomenon. I am seeing plenty of headlines about layoffs in recent weeks, even though the jobs market has remained strong. It’s definitely a weird time — we may be in a recession, we may not be, and it feels like many people are trying to will one into existence. I don’t know what to think.

I think that over the past year or so people have simply been going out and finding better jobs, and that’s put employers on the defensive. This is the first time in decades that labor has held any leverage in the market, especially after the Great Recession, and it feels like a lot of employers and companies still aren’t coming to terms with the new, likely temporary, dynamic.

That said, it does make sense to hold onto your employees (the good ones, especially), and not start handing out pink slips every time there’s a slowdown. In all likelihood, employers will need to go out and rehire anyway, so why not just ride it out and keep them onboard, especially if you have the resources to do so?

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Heaven help me, I agree with a CEO

The CEO of McDonald’s says his company is being unfairly targeted by a new California law. I think he’s right.

It’s not often that I sympathize with corporate whining, but in this case, I think the whiners have a point.

A new California law — AB 257, the Fast Food Accountability and Standards Recovery Act — was recently signed by Governor Gavin Newsom. The L.A. Times says that the law “creates a first-of-its-kind council of workers, corporate representatives, franchisees and state officials with a mandate to set minimum industry standards on wages, working hours and other conditions for fast-food workers statewide.” Essentially, the law was put into place to give workers more power in an industry notorious for unsafe working conditions and wage theft.

In effect, it gives the council the power to raise the fast food industry’s minimum wage up to $22 per hour for chains with more than 100 chains across the country and to put new safety conditions into place.

Obviously, the law is facing a lot of resistance, too, as it could drastically increase labor costs for fast food restaurants. Opponents have already filed a referendum to try and get the law in front of voters, where it could be voted down.

Now, I’m all for trying to find ways to increase wages, but I do find this law a bit…out there. Mostly because it is hyper-targeting a specific segment of a specific industry. That’s exactly what Joe Erlinger, the president of McDonald’s U.S., said in a statement:

“When done thoughtfully, fairly and applied across an even playing field, this kind of legislation can be highly effective…California’s approach targets some workplaces and not others. It imposes higher costs on one type of restaurant, while sparing another. That’s true even if those two restaurants have the same revenues and the same number of employees.”

The thing is — he’s right. There are plenty of low-wage workers out there, so why not try and raise wages across the board? Why JUST fast food? Why not other restaurants, too?

That’s what I find confounding about this law. There are an awful lot of people working in restaurants who make minimum wage (or below minimum wage) who would stand to benefit from some friendly legislation. But they may not work in fast food restaurants — or the right fast food restaurants — so they’re left out. How is that helpful?

My guess is that there’s more to it than meets the eye. Likely some sort of politicking, maybe we’ll find out one day. It’ll be interesting to see how this whole experiment shakes out, I guess.

But at the end of the day, somehow, and against all odds, I’ve found myself agreeing with a McDonald’s executive.

What has the world come to?

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Numbers, links, and more

• 9 minutes: The average length of a shower in the Netherlands. (The Wall Street Journal)

• $13 billion: The potential annual value of the U.S. market for COVID-19 vaccines. (BioPharma Dive)

• $400,000: The cash on hand that Doug Mastriano, the Republican candidate for the governor of Pennsylvania, has in the bank. His Democratic opponent has $13 million. (Axios)

• Why can’t weed companies make any money? Taxes, siloed markets, and exclusion from the financial system. (Politico)

• A look at the many ways that Britain has changed since Queen Elizabeth II was crowned in 1953. (The Economist)

• “When the butt-book complaints first began, she was concerned, but quietly continued doing her job.” (The New York Times Magazine)