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The Great Labor Shortage of 2021 came for Klavon’s Ice Cream in Pittsburgh, but rather than asking the U.S. government to end COVID benefits helping those put out of work, it used a novel idea to solve the “crisis.”
Like … offering to pay workers $15 an hour.
Co-owner Jacob Hanchar told the Pittsburgh Tribune-Review in March that the store was struggling to find even one person to hire for a business that usually has at least 11 workers by the summer rush. So the parlor announced it would raise its minimum wage to $15 per hour plus tips beginning April 1.
“I’ve never seen anything like it,” Hanchar told the Tribune-Review. “It’s an industrywide thing. By now, we should have five or six people hired, and we don’t have one. We usually staff up to 11 to 15 people by summer.”
The result: They received “well over a thousand applications” in a week and staffed 16 positions “practically overnight,” Hanchar told MSNBC Wednesday.
This is a problem that a capitalist economy is supposedly equipped to solve: If there’s truly a “shortage” of labor and a demand for more workers, companies can increase wages to incentivize workers to apply. It just so happens that a lot of companies are resistant to the idea of raising wages for fear of cutting too heavily into their profit margins. (Which raises the question of whether the business model is entirely reliant on paying people less than their labor is worth in the first place.)
What makes it all the more notable is that this small business selling ice cream somehow managed to find a solution for its hiring woes, even as the Chamber of Commerce and various states seized the “labor shortage” to end enhanced unemployment benefits, the additional $300 a week the federal government is paying those put out of work by the pandemic.
In recent weeks, a flood of mostly Republican-run states like Texas, Indiana, and Oklahoma have moved to end those benefits, bringing the total number of states who’ve done so to 20. Those benefits are currently set to expire in September, though the Chamber called on Congress earlier this month to end the benefits now.
But several corporations have announced wage hikes in recent days in order to tackle the staffing issues. Burrito chain Chipotle announced last week that it would raise its starting wage to $15 as part of an effort to hire 20,000 workers, and Bank of America said this week that it would increase its minimum wage to $25 by 2025.
McDonald’s also said last week that it would increase current employee wages by an average of 10 percent and raise its minimum entry-level wage to at least $11 per hour. But the change is only happening at the sliver of stores owned by the company rather than its franchisees. Workers with the Fight for $15 have been fighting for the burger giant to raise its minimum wage to $15 for nearly 10 years, and on Wednesday, workers at McDonald’s across the country went on strike for higher wages.
As for the ice cream parlor, Hanchar said they’ve found more benefits to the $15 hourly wage than just filling the positions.
“Especially in the restaurant business, turnover is a big issue, and the other issue is burnout,” Hanchar told MSNBC. “A lot of people work two or three jobs, and now they’re just working one job, so people are showing up on time now, they’re reporting to work in a better mood, customer service has improved.”
Hanchar also said there was minimal effect on the company’s profit margins.
“We have more people coming into our shop as a result of raising our wage because people want to support a business that’s taking care of their employees,” he said. “Also, our costs are going down as a result of less turnover, and we have not raised prices. So at the end of the day, I haven’t noticed a difference in our bottom line.”