Where Did All the Uber Drivers Go?
(Bloomberg Opinion) -- American executives’ latest headache is labor shortages. As the economy shudders back to life from the worst days of the pandemic, companies are struggling to hire qualified workers who are either hesitant to return to offices, don’t have the right training, are already getting unemployment, or some combination of all three.
The competition to hire workers is intensifying across industries from restaurants and retailers to financial services. Chipotle Mexican Grill Inc. and McDonald’s Corp. said this month they plan to raise their average hourly earnings by at least 10%. Bank of America Corp. announced coming wage hikes through 2025. And tech companies are following suit.
Already this year, Amazon.com Inc. has made two major pay announcements, offering signing bonuses of up to $1,000. Similarly, Uber Technologies Inc. and Lyft Inc. are spending millions on incentives to attract new drivers.
Large internet and software companies — including Facebook Inc., Alphabet Inc.’s Google and Microsoft Corp. — may come out relatively unscathed. Much of the wage inflation this year has been focused on labor-intensive, entry-level workers, not the software engineers these companies primarily rely on. According to jobs marketplace Hired, the average salary for software engineering roles increased by 5% in San Francisco area and 3% in New York in 2020. So far this year, there hasn’t been any significant changes on the job market front in those geographies.
Amazon’s situation is a bit more complicated. As the second largest employer in the U.S. with 1.3 million workers, it does have a large hourly workforce. If wage inflation accelerates, Amazon’s profitability will be crimped. For example, the company has said its latest pay hike cost more than $1 billion, on top of the $2.5 billion in incremental bonuses it gave to workers last year.
But gig-economy companies could take the biggest hit from the worker shortage. I’m skeptical about the ride-hailing companies’ prediction that drivers will quickly return after getting vaccinated and unemployment benefits expire later this year. The level of competition for hourly workers is unprecedented since Uber, Lyft and DoorDash began operations roughly a decade ago. Plus, retailers such as Amazon and Costco Wholesale Corp. are boosting wages and have health-care and retirement plans as well, benefits that the gig economy doesn’t offer.
In fact, it looks like most gig workers want a different type of job altogether. According to a recent survey of 25,000 Americans by McKinsey, more than 60% of gig-economy staffers said they would prefer permanent employment. The respondents also said not having health-care insurance was the No. 1 barrier to their well-being.
Following a major health crisis, it shouldn’t be a surprise that workers’ expectations for employers have risen considerably. While the larger technology companies have the resources and business models to deal with the new requirements, the ride-hailing and food-delivery companies aren’t as lucky. Workers, meanwhile, may finally have more bargaining power.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
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