- The economy is recovering, but Fed Chair Powell said it's "unclear" when the labor shortage will ease.
- FedEx made some simple hiring and retention changes and saw a record 111,000 job applications last week.
- Higher pay, improved benefits, and more worker flexibility helped the logistics giant fight the shortage.
Businesses struggling to hire could learn a great deal from FedEx.
The labor shortage's persistence has sparked discussions in the business world on how to bring people back to the workforce. FedEx's fiscal second-quarter report suggests the solution is obvious. The logistics giant is among the few businesses flooded with job applications over the last three months, bucking the trend seen throughout the economy.
While the broader economy is recovering well, it's "unclear" when the shortages will abate, Federal Reserve Chair Jerome Powell told reporters Wednesday. Job openings rebounded to near-record levels and quits remained extraordinarily high in October, signaling the labor shortage wasn't fading as many expected.
Where most companies rehiring efforts are floundering, FedEx is staring down more interested applicants than ever.
Here are the three ways FedEx attracted workers and beat the labor shortage.
1. Lifting worker pay — and keeping it there
Wage growth in the third quarter was the strongest since 2004, but only a couple of industries have seen raises keep up with inflation. For many workers, the pay levels seen before the pandemic just won't cut it anymore. The solution is as simple as President Joe Biden put it in June: "Pay them more!"
FedEx did just that. The company raised hourly wages for package handlers to $20 earlier in the year and awarded referral bonuses to those who helped the company bolster its ranks. The changes did the job. FedEx took in 111,000 job applications last week alone, the most in the company's history and more than double the 52,000 applications seen the week of May 8.
The pay bump came at a price. FedEx reported $470 million in additional costs linked to higher pay and shipping disruptions. Still, the company expects that pressure to ease in the coming quarters and for the initial investment to be well worth it. CFO Mike Lenz said the higher wages are "here to stay."
2. Benefits that keep workers around
Solving the labor shortage doesn't just require hiring workers, but keeping them as well. The abundance of job options has given jobless Americans more power than ever to pick and choose. That's shown up in quits data, as monthly walkouts have trended at extraordinarily high levels for most of 2021.
FedEx's solution: better benefits. The company recently updated its benefits package to include more paid time off and tuition reimbursement. The improvements are meant to keep more of its seasonal workforce around as it looks to tackle booming e-commerce demand, according to the earnings report.
Companies will need to look at pay and benefits if they want to fully tackle the worker shortage, David Kelly, chief global strategist at JPMorgan, told Insider.
"They're just going to have to push up wages, push up benefits in order to get people to come back to work," he said. "It's not just coming back to work. There are a lot of issues keeping people from working right now, and none of them are easy fixes."
3. Keeping work flexible
The shipping company has also taken strides to make work easier for its employees.
While the Omicron variant's spread is once again extending remote work, most companies' long-term plans anticipate a return to the pre-COVID norms of office work and 9-to-5 schedules. FedEx, however, made its systems more flexible for workers, seeking to provide options for those who aren't strictly full-time or part-time. Less "binary" scheduling will help in "navigating labor availability when and where you need it," Lenz said in an earnings call.
With the pandemic's fallout differing dramatically across the country, providing a range of work options will be key to hiring in such a competitive labor market, JPM's Kelly told Insider.
"Employers will have to be flexible with regard to working arrangements because there are people who have got used to working from home, maybe have childcare issues, dependent care issues," he added. "Yes, they'll work, but those employers are going to have to be flexible."