Labour Shortage – A major concern for Amazon & Others

Watching the markets over the past few weeks and found out some common points that concern companies especially the ones that are labour intensive.

  • Reduced operating hours resulting in missed sales
  • New hires have less productivity
  • High labour costs

Here are some quotes that I came across and are worth mentioning:

Amazon - “In Q3, we saw nearly $1 billion of inflationary pressures, primarily tied to wage increases and incentives in our operations. Our average starting wage is now over $18 per hour with an additional $3 per hour depending on shifts in many locations and sign-on bonuses that can be up to $3,000.”

Chipotle Mexican Grill – “Labour costs for the third quarter were 25.8%, an increase of about 40 basis points from last year. This increase was driven by our strategy to increase average nationwide wages to $15 per hour.”

The above sound more on the wages that are increasing but wait there’s more - Hiring and training challenges.

Waste Management – “I would tell you that when I look at the labour increase whole dollars, and this is in aggregate, about 1/4 of it is related to some additional training and hiring we’re doing.”

Labour Shortage is another concern that needs to be addressed.

Kimberly Clarke – “We mentioned U.S. labor costs and pressures on transportation globally. I think that’s going to remain elevated for a while because I don’t see a fundamental catalyst to change that in the near term.”

That’s all I could notice from the talks – How will the factors mentioned above impact your decisions and are there some factors that you think are at play? Mention them down below!

Once wage inflation has started, it is difficult to stop. Employees are irritated by reductions in pay. Wages rising is one of the fundamental reasons driving inflation higher in a self-reinforcing cycle.

By the way, full-time analysts used to be the only ones who could get this sort of information on the overall status of an economic variable. You’d have to listen to all of the earnings calls yourself and piece everything together.

These are great points! Bearish though. Well, I think you missed on a crucial point and that is automation. I am bullish on automation and here the quotes that I weigh on.

“So one of the things that we’ll be looking at is automation projects and spending our money on those projects that help to reduce the reliance and just become more efficient that way.” – Merit Medical Systems

“Recently, a lot of the focus from our retailers, or there’s been a big focus, around the labor shortage, and thus, a push for even more presence of self-checkout.” – Hershey Co

Automation should tackle labour problems!

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