Some employers finally get that raising wages attracts workers

“When we lack the will to see things as they really are,
there is nothing so mystifying as the obvious.”
 — Irving Kristol —

CALL IT A HOMER SIMPSON MOMENT: the light bulb insight that paying more is a great way to get people to work for you. Henry Ford had that moment  on January 5, 1914 when he stunned the world with his decision to double the wages he paid to all his workers. How else to “stimulate the economy”?

Hillary Drago sides with Homer and Henry. She recently raised pay to a rate above inflation for her staff at Pizzeria Libretto in downtown Toronto.

She also plans to soon introduce a health and dental plan for employees that includes physiotherapy, massage therapy and mental health services.

It’s the best way she can think of to attract and retain good workers—and it works.

If you pay them, they will come

Restaurant owners have complained loud and long about a shortage of cooks and servers, since the lockdown measures were lifted. But not at Pizzeria Libretto. “We haven’t had much of a problem hiring,” Drago says.

The labour shortage is real: data shows about 246,000 people who left their jobs at the outset of the pandemic haven’t returned to work. The bulk of those people worked in food services and construction.

Yet after a bruising 14 months of on-again-off-again lockdowns, few employers are willing to pay more to attract new staff.

The average hourly wage in Canada in July was just 1.4% higher than it was 15 months earlier in April 2020.

Statistics Canada reports wages for all food service workers grew by just 55 cents per hour, between February 2020 and June 2021. Wages for construction workers went up by just 30 cents per hour.

Job security first

Some of those workers have simply found other jobs in other sectors. “If you’ve been laid off three times (in the restaurant industry), chances are you’re going to look for a more secure job,” says David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives..

Finding new staff wasn’t so straightforward when the lockdowns lifted in late June and early July, says Adam Colquhoun, who owns Oyster Boy restaurant in Toroonto. “Suddenly all these restaurants were hiring at the same time.”

Our only real way to attract workers was to offer more, he said. So he advertised higher hourly pay, from $15 to $17 on average, and a $1,000 retention bonus after three months.

The new incentives helped Colquhoun recruit 12 workers in two months.

Jason Rosso, owner of a Brampton gastropub said he had little choice but to do the same. He increased the wages for all employees between $3 and $4 an hour. New line cooks, positions that typically make no more than the $14.25 an hour Ontario minimum wage, were signing contracts at $23 an hour.

“I’ve never paid that much for line cooks before. But what else were we going to do?” asked Rosso. “The restaurant industry has shrunk exponentially. The talent pool has disappeared.”

New era of higher wages not likely

Will many employers soon be pulling a Henry Ford? Not likely says says Jim Stanford, a senior economist at the Centre for Future Work.

“Many of these businesses experienced a challenging year and a half, so they’re reluctant to pay for labour. It would be a good thing if wages pick up, but I’m not confident they’re suddenly going to rise on their own accord.”

Raising pay for workers often means raising the price charged for goods and sevices—which can bring a loss in customers.

Drago admitted she wondered: “Will customers still come here at this new price point?”

She was pleasantly surprised when people flocked to the pizza joint and happily paid her slightly higher prices, when the lockdowns were lifted.

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