How Did Covid-19 Create a Wage Boom Among Blue-Collar Workers?

Even before the arrival of Covid-19 on American shores, wage gains among manual labor and blue-collar workers were strong, reversing what had been a 30-year trend of increased compensation leverage for white-collar workers.

As the US economy begins to get back on track, construction jobs are booming, while industry giants like McDonald’s are hiking up wages and providing additional benefits to entice new workers. With a stream of baby boomers retiring from blue-collar roles, companies across the country are experiencing an ever-increasing skills gap, with economic reopening combined with a tight labor market culminating in a boom in job wages among workers who perform manual labor.

Strong demand Blue-collar pay rates have skyrocketed in recent months. Strong demand in manufacturing, transportation, and logistics saw skilled labor job postings increase by more than a million between December 2019 and December 2020, rising to 6.6 million.

Joanie Bily is a workforce analyst with EmployBridge. She affirms that there is a strong demand for blue-collar workers at the current time, highlighting the significant increase in job postings in the supply chain industry. As Bily points out, the surge in demand for consumer goods has created an increased need for warehouse and logistics workers.

The vast increase in people staying at home throughout the pandemic triggered significant changes in consumer trends. As Bily points out, the same factors at play in shifting consumer demand have also made it even more difficult to fill vacant blue-collar roles. Factors such as health and safety concerns, unpredictable school reopening plans, and generous unemployment benefits are continuing to impact the labor force, making remote, stay-at-home roles all the more enticing. However, for those on the lower end of the pay scale in the hospitality, retail, and travel and leisure industries, transitioning to sectors like logistics presents lucrative opportunities.

Need for technical skills As Bily states, the hourly wage for a logistics worker has increased far beyond the minimum wage. She cites the need for technical skills stemming from the emergence of robotics and AI as a primary factor driving up wages.

Between March and May 2021, drivers for Dunzo delivered more than 20,000 orders to hospitals alone. While Covid-19 devastated many industries, the pandemic also created significant opportunities in others. Delivery staff, health care personnel, pharmacists, researchers, manufacturing workers, and transport and logistics workers remain in keen demand, highly sought after today. As companies reset supply chains, truck drivers across America are scrambling to keep pace with demand.

Tight labor market Donna Kauffman, the co-owner of a Texan landscaping design and construction company, explains that the tight labor market has pushed up her company’s starting wage compared with previous years. She points out that a steady decline in workers prepared to do hands-on labor over the past two decades has culminated in considerable labor constraints in virtually every industry.

According to a study from the National Federation of Independent Business conducted in June 2021, 44% of companies had openings for skilled workers, with 66% of construction companies reporting a shortfall of skilled and qualified workers to hire. Kauffman explains that while her landscaping company formerly hired young adults—typically high school students who opted not to go on to college—gradually the labor pool shrank as high schools in the area encouraged more students to attend college.

In the United Kingdom, a combination of Covid-19 and Brexit have sparked a long-promised blue-collar wage boom. New rules precluding immigrant labor following the UK’s exit from the European Union culminated in significant shortfalls of workers in key industries. With the labor force shrinking at an unprecedented rate, firms scrambled to fill skills gaps left by immigrants returning to EU countries, hiking up pay and sign-on bonuses. Despite the significant incentives offered by employers, many UK industries continue to struggle to fill the void. Although 2 million people remain unemployed, having left or lost their jobs at the height of the pandemic, there is a significant mismatch between the unemployed and the skills required to fill open roles.

Growth in the construction industry The pandemic triggered a surge in unemployment rates on this side of the Atlantic, too. To help struggling Americans make ends meet, the government dished out stimulus checks to millions of citizens, as well as billions in unemployment aid to support struggling families. By the second quarter of 2021, the US economy was already showing the green shoots of recovery, but as businesses reopened, the number of blue-collar job postings increased dramatically, due largely to changes in consumer demand, such as a surge in people shopping online, and growth in the construction industry.

Daniel Zhao, a senior economist with Glassdoor, predicts that as the economy reopens, demand for in-person services will only grow, forcing companies like McDonald’s to increase wages still further. Debate between the White House and Congress continues regarding a tentative federal spending and infrastructure bill, but many believe that the shortfall in blue-collar and manual workers could be here to stay for some time.