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Published in Talent

Survey: Low pay, child care constraints hold back West Michigan labor participation

BY Sunday, January 15, 2023 05:16pm

People in West Michigan indicate that low pay and the inability to find affordable child care are two key factors keeping them out of the workforce. 

That’s according to the results of a new survey from West Michigan Works!, the local workforce development agency. More than three-quarters of the 1,413 job seekers and workers who answered the survey cited the ability to access and afford child care as a barrier to work. Nearly two-thirds told West Michigan Works! that they either “strongly” or “somewhat” agree that potential wages were not enough, even though employers have been increasing compensation the last two years at rates higher or double than recent trends.

The survey responses affirm worker sentiment as the civilian labor force in Michigan remains below pre-pandemic levels, contributing to an acute labor shortage that spans  across the economy.

Many employers have responded to the worker shortage with larger pay raises than what they provided in recent years and retention and sign-on bonuses to attract and retain employees. Still others are offering child care assistance and more flexible work hours for working parents, in a move to bring people back to the labor force.

“I see employers addressing many of these issues,” West Michigan Works! COO Angie Barksdale told MiBiz. “Are we going to solve the issue tomorrow? No. It’s a big bear of an issue on multiple fronts, but it’s rising to the level of attention these days more than I’ve ever seen it.”

The number of survey respondents who cited wages as a barrier to work is a reflection of the high inflation that’s exceeding the larger wage increases that employers have been providing, Barksdale added.

“That’s really been compounded with the impact of the growth in the cost of everything,” Barksdale said. “It’s the reality of day to day. All of that just pinches the penny. So, even if wages are going up, are they going up considering the increases in our daily living costs?”

Area employers who responded to an annual survey by The Employers’ Association in 2022 raised wages last year by an average of 5.2 percent, an amount that exceeds historical norms as companies adjusted to the fiercely tight labor market. The 2022 wage increases were higher than the 4.4 percent average pay raises area employers provided in 2021 across all sectors, according to The Employers’ Association, a Grand Rapids-based human resources nonprofit that annually polls members to gauge wages in the region.

Up until 2021, The Employers’ Association’s annual wage survey found that average pay increases in the Grand Rapids area had been running lower, including 2 percent in 2020.

“Employers are reacting to some of this, but there’s still a population of people out there that are feeling like these are still issues for them,” Barksdale said.

  

Addressing child care

Along with wages, 77 percent of the workers and job seekers who answered the 2022 West Michigan Works! survey “strongly” agreed that affording child care was a barrier to employment. The availability of affordable child care can often limit the hours a person can work, survey respondents told West Michigan Works!

“Lack of child care, availability and the affordability of child care, continues to be a prominent issue for our community,” Barksdale said. “It’s just the squeeze of things.”

The pandemic brought issues with child care to the forefront. Gov. Whitmer and state legislators directed millions in the state budget to address the issue, allocating $100 million to support a goal of opening 1,000 new child care programs over the next two and a half years, offering grants for operators to renovate and upgrade facilities, and helping centers recruit, train, retain and develop staff.

As well, the state has supported a statewide expansion for the MI Tri-Share Child Care program, which divides child care costs between parents, employers and the state.

Day care in Michigan costs $905 a month for an infant and $741 for a 4-year-old child, according to estimates from the Economic Policy Institute, a Washington, D.C.-based think tank.

Ottawa County recently launched an effort to create 1,000 new child care slots in the next three years leveraging $7.5 million in federal stimulus funds with nearly $25 million from the private sector. The outdoor education nonprofit ODC Network, working closely with the Ottawa Area Intermediate School District, leads the initiative, which has more than 10 private-sector employers that have committed financial support, including building child care centers and subsidizing some of their employees’ child care costs.

In Zeeland, automotive supplier Gentex Corp. (Nasdaq: GNTX) plans to develop a 250-slot child care center at its headquarters for its first- and second-shift employees. 

  

Labor participation lags

Such efforts are designed to bring more people back into the workforce amid the acute worker shortage and lagging labor participation rates that have yet to recover to pre-pandemic levels.

Statewide, Michigan’s civilian labor force stood at 4.85 million as of November 2022, the most recent month for which data are available, which compares to 4.92 million in January 2020, just prior to the pandemic’s onset.

The Grand Rapids area had a civilian labor force of 570,200 in November, according to the latest data from the Michigan Department of Technology, Management & Budget. That’s still about 9,200 fewer people in the civilian labor force than January 2020.

Muskegon’s labor force has returned to pre-pandemic levels, reaching 77,200 in November, according to the Department of Technology, Management & Budget.

In a presentation last month at The Right Place Inc.’s annual economic outlook, Fifth Third Bank Chief Economist Jeff Korzenik noted that nationally there were 10 million job openings and only 6 million people seeking work. The labor shortage, Korzenik said, “is not going away.”

One of the fundamental issues employers face in attracting workers is a pandemic-driven change in how some people view work, Barksdale said.

The pandemic accelerated many of the issues that already existed prior to the pandemic, such the Baby Boomer generation retiring and the lack of population growth to replace those workers, much less meet growth.

“I think COVID just exponentially increased employment and talent issues that we were already facing, or that we were intending to face,” Barksdale said. “We were already pre-COVID facing a huge wave of retirements in the next five to 10 years in our region, particularly.” 

In the months since the start of the pandemic, many workers decided that “I’m done, I’m not going to work the extra three to four years that I was planning,” Barksdale said, who noted the survey heard from older workers returning to the workforce who “feel passed over” by employers because of age bias. 

As well, many people “had a reality check after COVID” that has altered the labor market, Barksdale said.

“Our view on work or our culture of work has changed after people had a time to sit back and say, ‘You know what, we were running ragged. Do we really need to work 80 hours a week? Do we really have to have a two-income household? Can we make do with not traveling everywhere?’” she said. “There’s a lot of people who have reevaluated their work lifestyle.

“All of that compounded on top of some of the other issues we’re facing with daycare — on top of all of the things we were facing pre-COVID — is just tightening and tightening and tightening the labor force.”

The gig economy also enables more people to work as contract workers doing side jobs with hours that are convenient for them in positions such as Amazon delivery drivers or Shipt grocery shoppers where they can set their own hours and earn good pay, Barksdale said. Those jobs generally do not count in labor-force data because those workers pay their own taxes, she said. 

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