Local Trends Influencing the Southern California Labor Market in 2021

Judging from the latest unemployment figures from the State of California, one might think employers are having no trouble finding people to fill positions. The latest numbers from the California Employment Development Department show a 9% unemployment rate across the state in January, down from the 16% peak seen in April and May of 2020. The local numbers for Southern Californian counties are mixed, with some slightly better than the statewide total—including Orange County at 7.4% and Riverside County at 8.6%. Meanwhile, others are significantly worse, such as Los Angeles County at 12.7%.

Despite these figures, many Connect Staffing clients are finding the labor supply to be extremely tight in recent months. This is especially true at the lower tier of the wage scale. Employers are facing tough competition to find and attract qualified candidates. These are the trends our team believes are driving the tight blue-collar labor market in Southern California:

Pay is a key consideration for candidates

A worker’s bottom line is the key driver when they choose a job. An employer’s hourly rate sets the baseline, but it’s not the only factor candidates look at when deciding whether or not to apply. To determine a job’s minimum adequate payrate, an employer must consider a number of key considerations. Factors include:

  • Distance from home. A long commute quickly negates a twenty-five-cent difference in hourly pay. Consider the distance from the communities where the majority of your workforce lives.
  • Duties. Pay has to be adequate in relation to the job duties required.
  • Preemployment requirements. Some candidates may be discouraged from applying if preemployment requirements are set too high. Physical exams, detailed background checks, COVID screening, and drug tests are examples of requirements that may be essential for some jobs but may be optional for others. A candidate who feels their privacy would be unnecessarily invaded may prefer to not apply.
  • Environmental factors. Candidates expect higher rates to work in tough environments, such as refrigerated warehouses.
  • Benefits program. Candidates may also look at employee benefits (health insurance, overtime, bonuses, etc.) that provide perks beyond the base pay. Businesses seeking temp-to-hire associates can boost the attractiveness of the position by telling their recruiter about the benefits package that could be on the table for a successful hire.

Amazon’s center of gravity

The pandemic has fueled an extraordinary boom for online retailers, with Amazon leading the way. Employers located close to Amazon warehouses often find their candidate pools have run dry. Amazon offers enticing bonuses, higher rates, and other perks. This has had a significant impact on the availability of workers for other employers.

Competition from unemployment checks

Federal and state unemployment relief efforts have created an unwanted side effect among the workers in the entry-level tier of the labor marketplace. For many of these workers, who typically expect to get paid minimum wage, unemployment benefits put them further ahead than if they worked full-time. Now that some benefits programs have come to an end or are being reduced, we are seeing a slow return of those workers into the job market.

The pandemic is keeping people home

COVID-19 has caused a dramatic number of people to temporarily exit the workforce. School closures have forced many parents to stay home, especially with daycare costs being unsustainably high. Some people have been forced to stay home to protect themselves or a family member from the risk of infection. Taken together, these effects have had an important impact on how many candidates are available.

Fewer guest workers from across the border

Many employers in Southern California rely on laborers from Mexico and Central America to fill temporary and seasonal positions. With crossings at the border down significantly during the pandemic, these employers have had to find domestic labor to close the gap. Many have found that the supply of domestic labor is inadequate to fill their positions, at least at minimum wages.   

Workers value their time

Today’s workforce understands its value. Many candidates are willing to hold out for jobs that pay better than minimum wage, in part because they know the jobs are out there. We have seen this play out in the area around Los Angeles. The minimum wage in the City of Los Angeles and unincorporated areas in LA County is $15 per hour, but surrounding cities are still subject to a $14 minimum wage. As a consequence, employers in lower-wage areas are in competition with businesses within the city.

Work-life balance is a priority more now than ever before. Attracting the best talent requires employers to balance these concerns.

How employers can attract a deeper pool of candidates 

Employers struggling to fill positions have two clear strategies for finding better candidates. The first should come as no surprise: raise rates. This can be an easier proposition for smaller employers who can bring in new employees at a slightly higher rate—while also offering equivalently increased rates to tenured employees. Large employers often have a harder time raising rates for new hires when hundreds (or even thousands) of existing employees may demand the same pay.

A second, longer-term strategy is to develop a strong workplace culture. Employees who are happy in their position, like their work environment, and feel recognized and validated by management will be more likely to stay even if a competitor offers a small bump in pay. In our experience, companies with an empathetic, employee-first management approach can sometimes afford to pay a slightly lower rate.

Both strategies are geared toward addressing the rationales of the job seeker. Many of the positions Connect Staffing fills are temp-to-hire. Once the associate is in the door, their goal is to stay. The client’s challenge is to entice them across that threshold.

The team at Connect Staffing is working diligently every day to find great candidates for our clients’ open positions. We’d love to partner with your business to develop sustainable strategies to address your staffing needs. Call us at (714) 622-4494 to get started.


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