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2019 Labor Cost Predictions & How They Impact Your Business

The entire eCommerce industry is driven by labor cost and availability. For years, the cost of labor has been relatively predictable for business owners. Now, things are beginning to pivot.

In recent years, we’ve heard a lot about the hourly minimum wage increasing, particularly in states like California and New York. While $15 per hour sounds like a dream for new workers entering the labor market, business owners are scrambling to plan for these dramatic increases in operation costs.

Whether you are running an eCommerce operation out of your garage or you’ve partnered with a 3PL company, labor cost is the great equalizer that we all must face – and somehow find room for in our budgets.

As 2018 winds down and we all plan for the road ahead in 2019, let’s take a look at 2019 labor market predictions and how they will impact your business.

Labor Cost & Job Repatriation

With international trade taking on a new form in 2019 and beyond, many international and multinational companies are making plans to migrate their jobs from overseas to the United States.

According to digital marketing strategist, Gord Collins, the current economic landscape is opportunistic for workers. However, as wages increase for the labor force, businesses must realize greater profits on goods and services in order to balance the increased labor cost.

Tip

If your business is currently making use of overseas labor and is planning to either add an operational base in the United States or repatriate overseas jobs, consult with a business strategist to plan which financial and risk-management levers you may need to adjust within your business.

Growth, Growth, Growth

Data shows that the economy is growing and several of the key data markers economics look at are headed in the right direction.

For example, the employment report released in October 2018 revealed that 250,000 jobs were created in 2018 and the U.S. is in a 49-year-low unemployment rate of 3.7 percent. Translation: more jobs are opening up and more people are stepping up to fill them. Win, win.

This trend is expected to continue. Economists anticipate that the United States job market will add 11.5 million jobs between 2016 and 2026.

One other thing is growing, too: wages. The national labor cost is gradually increasing. In 2018, there was a 3.1 percent wage growth that the Federal Reserve warns may be “an ominous cost to business.” However, critics of the Fed say this is a sign of a healthy national economy.

Tip

As the cost of wages increases, businesses that rely on labor and logistics services to complete routine tasks such as inventory management, pick-and-pack, and shipping would be wise to automate as many processes as possible. Doing so will minimize hourly wage costs while systematizing key processes and reduce risk of human error.

Manufacturing & The China Tariff

Manufacturing and retail are the industries most likely to be affected by the transformed relationship with China. As the production of goods moves back to the United States, costs are likely to increase, as well.

Add to that the increased labor cost and the cost of retail goods made and sold in the U.S. will be forced to change. Luckily for retailers, these cost increases will be universal, in most cases; meaning your competition is facing the same challenges you are and will likely be forced to increase their prices right alongside you.

Tip

When recalculating the sale price of your retail and eCommerce goods, factor in the increased cost of operations at least a year in advance. Working backward, plan for gradual price increases that will allow you to maintain your current customer base without shocking buyers.

Attracting and retaining an affordable, trained operations workforce is becoming harder to do in our booming economy. At Dotcom Distribution, we have proven tools and systems in place to not only meet the requirements of our fluid labor market, but also to help our clients thrive during the coming changes.

If you have questions about labor cost increases and your business, contact us to speak with one of our logistics experts.