The Perils of a Low Unemployment Rate

Nearly three years ago, I was speaking with a client who owns an oilfield supply company when he revealed to me his favorite barometer of Alberta’s resource-based economy: He gauged the strength of the economy on the level of service at fast food drive-through windows. His theory was that when the oilfield and construction industries were slow, you had a higher caliber of individual flipping burgers and processing orders to pay their bills. As a result, your number six combo was assembled quickly, correctly, and courteously. Conversely, when the boom is on, and it’s possible to earn a handsome hourly wage doing even the most menial jobsite labor, the food-service industry has to take whomever they can get, even the borderline-unemployable. As a result, they can’t get your order right, it takes forever to get the paper bag to your car window, and they move their lips as they miscount your change. I don’t know if this theory was original with my client, but it got my full attention at the time. This year, however, the wisdom of it has become quite apparent.

The casualties of the boom in Alberta’s energy sector are the retail and hospitality industries. While low unemployment is inarguably hampering companies who are looking for skilled tradespersons, the service sector’s employment pool has taken a far worse beating. Realistically, the decision making process for even the most unskilled and educationally disadvantaged job applicant is simple; mop floors at the Arby’s for $12 an hour, or sweep up at a construction site for $16 an hour. You don’t have to be a high school graduate to do the math. The conversations at every social gathering of people who work in either oil or construction that I attend inevitably falls to lurid tales of the outrageous lengths fast food franchise owners in Fort MacMurray have to resort to in order to attract staff. Wagging tongues insist that one restaurateur is not only paying people fifteen dollars an hour to run the deep fryer, but also he’s subsidizing his staff’s housing costs, and co-signing their car loans.

The reality of the situation sinks in as you drive up and down the retail and restaurant nexus of the Calgary Trail. Brightly colored signboards that used to proclaim “SALE SALE SALE” now universally cry out “HELP WANTED! NOW HIRING! GOT A PULSE? WE’LL PAY YOU $10/HOUR!!!” Even more surreal is the war of wages; retail and hospitality employers are posting their wages on roadside signs, and as I drive to and from my office, I have watched the numbers being offered climb over the last five months as companies compete with each other for a dwindling pool of applicants. In the current job market, Alberta’s official minimum wage of $7.00 an hour seems to be entirely theoretical.

Of course, the consequence of having bright, capable people abandoning the service industry is a potential decline in key measurements of success. Rising wages impact retailers’ metric of Sales Dollars per Labor Hour. As corporate HR departments analyze store metrics, they reduce labor budgets, which reduces scheduled coverage in stores that are already understaffed. The increased workload increases job stress, and adversely impacts the level of service provided to customers. Even subliminal dissatisfaction at a shopping experience reduces average dollars per transaction at the till, which shaves away top line sales volume at the same time that increased costs are having an impact on store level gross margin.

Despite the fact that Alberta’s prosperity is driving an increased demand for consumer goods and services commensurate with the increase in disposable income, it’s still possible for a company to not benefit from increased retail spending if they fail to manage their human resources well enough to meet customer expectations. In a competitive marketplace, if you can’t adequately service your customers, you risk having them give their business to someone who can. Unfortunately, service sector employers are all in an equal pinch trying to achieve even minimal staffing requirements, and acquiring and retaining skilled, talented, ambitious employees is a yet more imposing challenge.

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