Where Did All of the Food & Beverage Workers Go?

Nov. 2, 2021
Finding the necessary labor has long been a challenge for food plants. The pandemic made things worse.

Help wanted. Really wanted.

That’s the situation that many food & beverage companies find themselves in. It’s always been tough to get people to work in a food plant; the pandemic ratcheted up that difficulty. Labor scarcity is now the No. 1 issue for many food processors (and not just food processors). It’s a major cause of the kinks that now are roiling the entire food supply chain.

Almost half (45%) of food companies surveyed in a recent Deloitte study said that retaining talent was their top overall workplace challenge. According to the U.S. Bureau of Labor Statistics, there were more than 360,000 unfilled manufacturing jobs in nondurable goods, including food, as of last July.

The situation is affecting processors of all sizes. A Cargill turkey plant in Virginia is running at 70% of capacity because of problems finding workers. “We’ve increased wages, we’ve offered signing bonuses, we’ve offered enhanced 401(k) benefits, onsite health care, day care – but the fact is, we’re still short of labor,” CEO Dave MacLennan told Bloomberg Markets.

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Bonduelle Fresh Americas, a processor of salads and other refrigerated products, has more than 100 openings in each of its four U.S. plants, across both skilled and entry-level positions, says CEO Andrea Montagna.

The effects of the labor situation have been felt throughout the supply chain, with damaging consequences. The most noticeable has been the difficulty in filling orders. Grocers are having trouble getting orders filled, with a regional grocer in Louisiana telling the Wall Street Journal in August that his stores had seen fulfillment rates on some orders drop as low as 40%; usually it’s around 90%. Shortages have cropped up in a wide range of goods, especially specialty meat items like chicken wings.

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Widespread woes

In one sense, the food industry’s labor challenges are simply a reflection of the situation with American, and global, business as a whole. As the world struggles out of the pandemic, companies – especially ones that laid off many of their workers in the pandemic’s early stages – are finding it hard to get people to come back to work.

“All you have to do is drive up and down any street in America” to see help-wanted signs, says Howard Dorman, co-leader for food and beverage practice at consultancy Mazars. “Everyone’s looking for people. We never had this before.”

But in another sense, the food industry’s current labor problems are nothing but a concentrated and intensified version of what it’s been suffering through for a long time. When it comes to finding workers, food plants have always had to deal with two huge disadvantages: the arduous nature of the work and the lower pay.

“Simply put, the entry-level jobs in meat plants are typically the lowest-paid, and the working environment has a tremendous effect on new employees,” says Matthew Bayer, vice president for client development at We R Food Safety!, a compliance consulting firm for meat processors. “Imagine getting paid entry-level wages to perform physical labor in what are typically very cold rooms — it’s not a very popular option. That has always made it very difficult to attract and retain labor.”

The lower pay doesn’t help. According to the U.S. Bureau of Labor Statistics, the average hourly wage for production and nonsupervisory employees in food manufacturing is $20.01 an hour, about 17% less than for manufacturing as a whole.

A walkout at the Frito-Lay plant in Topeka, Kansas, that lasted 20 days was triggered in part by mandatory overtime. © Evert Nelson – USA Today Network

Food has traditionally lagged behind other forms of manufacturing in pay for reasons that include the industry’s low margins, the seasonal nature of some of the work, and the fact that much of it is performed by immigrants, who often work for lower wages. Another contributing factor might be the relatively low-tech nature of the work, in terms of both operations and what is produced.

“The food sector has historically been behind its manufacturing peers in use of technology and automation, which means that it hasn’t employed the higher compensated skills of a more digitally advanced workforce to the same degree,” says Barb Renner, a vice chairman and U.S. consumer products leader at Deloitte.

“While there is a legacy wage structure, we might see that gap shrink as more technology is put to use and new skills are needed.”

Another situation that the industry has long had to cope with is a shallow labor pool. Many food plants, especially meat processing plants, are located in remote areas where they often are the biggest single employer. This is a bit of a double-edged sword. A shallow labor pool means fewer alternatives/competitors for potential employees, but also fewer for employers.

“A small labor pool (and being the largest employer in the area) means that companies are more likely to have market power over workers, who cannot easily find employment elsewhere, and this generally results in lower wages and/or worse working conditions, but perhaps higher profits,” says Brad Hershbein, senior economist and communications advisor at the W.E. Upjohn Institute for Employment Research. “However, if workers get sick, the employer may have little recourse.”

The meat sector was hit especially hard by the pandemic, and it’s been a struggle to find workers.

Making things worse

As it has throughout American business, the pandemic has intensified and deepened many of these problems in the food industry. Food plants, especially meat processing plants, became epicenters of COVID infection. According to the Food & Environment Reporting Network, at least 1,466 food plants (581 of them meat processing facilities) had COVID outbreaks between April 2020 and September 2021, with 359 deaths, 298 of them meat workers.

The situation led to high tensions, especially in the early stages of the pandemic, as companies struggled to figure out protective measures. In one high-profile case, Tyson Foods had to fire several managers at its plant in Waterloo, Iowa, after allegations surfaced that they had organized bets around how many workers at the plant would contract COVID.

In one sense, these tensions were unavoidable. Food processing has to be done in person, often in crowded conditions with little ventilation, creating natural conditions for the spread of infectious disease. Even social distancing, much less remote work, was difficult or impossible. The situation is exacerbated in many cases by the living situation of some of the workers, especially immigrants: multigenerational families together, often as part of a tight-knit community.

The tensions started to ease as companies began instituting protective measures, such as extra gear, physical barriers between workspaces and staggered breaks. They eased even more when COVID vaccines started becoming widely available.

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Derrell Peel, a livestock marketing specialist at Oklahoma State University, says the meat industry, at least, responded as well as could be expected to a difficult and unprecedented situation.

“From what I see of the industry, I don’t think you can lay a huge amount of blame on the companies,” Peel says. “As they learned things and figured out what was happening, certainly it was in their interest to keep their workers healthy and working. The shutdowns cost them dearly.”

Now the question is how much tension will remain over the long term.

“I wouldn’t be surprised if there are lingering bad feelings, especially if workers felt they had to work in conditions even more dangerous than usual, and if employers felt workers were abusing UI [unemployment insurance] or other benefits,” Hershbein notes.

In the view of Bayer of We R Food Safety!, one potential problem is resistance by some workers to anti-pandemic measures, especially mask mandates: “Employees who do not believe masks should be mandated by the government in their workplace, or simply refuse to wear them, will leave as soon as they can find a job that doesn’t mandate the wearing of masks.”

Bayer believes that the pandemic highlighted certain existing problems: “The pandemic hyper-accelerated all the issues that the meat and poultry processing workforce was experiencing up to that point.” One of these, he says, is that the pandemic pushed older workers who were considering retirement over the edge.

These older workers will take their on-the-job knowledge with them.

Three Strikes Called on Food Industry

The food industry had been known as a sector with relatively little labor unrest. But three high-profile strikes took place this year at plants owned by some of the industry’ s biggest names: Kellogg, PepsiCo/Frito-Lay and Mondelēz.

In the Frito-Lay strike, at a plant in Topeka, Kan., workers were objecting to a situation where not only would they have to work 12 hours in a shift, they often were not notified of this until the end of their previous shift. Some of the workers claimed they hadn’t had a day off in five months. The settlement, reached July 24 after a 20-day walkout, offered an end to these so-called “suicide shifts” and one guaranteed day off a week.

The Mondelēz strike lasted longer, a little over a month, starting in early August. Overtime was an issue there also, but in a different way. The contract with the Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union had specified that overtime pay kicked in for every hour worked after eight in a 24-hour period; Mondelēz wanted to change that to every hour after 40 worked in a given week. The compromise that was reached, and ratified on Sept. 20, will allow (but not require) workers to sign up for three 12-hour shifts in a week; they won’t get overtime pay, but they will be paid for 40 hours.

The Kellogg strike, which started Oct. 5 at plants in four states, was still ongoing at press time. The union involved, Bakery, Confectionery, Tobacco Workers, and Grain Millers’ International, says Kellogg wants to reduce health and retirement benefits and paid time off, while shipping jobs to Mexico; Kellogg says its pay and benefits are “among the industry’s best.”

“The industry always knew that transfer of that knowledge was crucial to long-term success, but now, filling those gaps with younger, less-experienced employees will be even more difficult with the accelerated turnover situation,” Bayer says.

Filling employment gaps is arguably more important in the short term. One of the biggest lingering effects of the pandemic is that, as floor employees drop out of the workforce for whatever reason, the burden on the remaining ones increases – sometimes to intolerable levels. That situation has led to high-profile strikes this year at plants belonging to some of the biggest names in the food industry: PepsiCo, Mondelēz and Kellogg.

Tough conditions

In the longer term, the industry will have to figure out how to make plant jobs more attractive. The pandemic will eventually ebb, but the problems that it exacerbated will still be there.

Some of the conditions that make food processing work challenging aren’t likely to change soon. If meat or any other products have to be handled and processed in a cold environment, or if ovens or fryers give off heat, there’s no getting around that. The best way to improve working conditions in the long term is probably through investments in automation that lets machines handle the more unpleasant tasks. The labor problems in the wake of the pandemic will serve as a motivation in that regard, Hershbein says.

“There may be increased investment in automating some processes to reduce the need for labor,” he says. “More demand for such automation will increase the incentive to further develop it, so even if machines aren’t quite great at disassembling carcasses now, they will likely get better in the near future.”

But automation won’t be a panacea, and in most cases, it won’t be a short-term option. Companies that want to improve labor relations will have to concentrate on some more basic measures. Bayer suggests that simply paying positive attention to employees, especially new ones in a large organization, can go a long way.

“Processors are trying to hire additional staff, especially now, but the company culture always has a big effect on retaining those team members,” he says. “If employees don't feel welcomed or cared for, they simply stop showing up for work. And word can get around the small towns and regions about a company pretty quickly if it doesn’t treat its employees well.”

One of the most obvious things a company can do to attract employees is raise pay. And it’s being done, especially in the meat sector. Tyson Foods, for instance, has implemented pay increases across the board, bringing its average pay plus benefits up to $22 per hour.

But many employers see pay increases as a last resort. The problem is, once they’re awarded, they’re hard if not impossible to take back.

“Raising wages is an option, but more permanent, and employers may be more reluctant to pick this option (at least, raising wages sufficiently high to solve the ‘shortage’) without exhausting others,” Hershbein says.

It can be especially tricky to raise them for new hires, which may alienate existing employees. “Existing employees need to be incentivized to stay, and you need to remember that starting out entry-level teammates at higher wages creates a domino effect, where you will need to increase existing line leads and other employees’ wages, or they’ll feel slighted and may leave for opportunities elsewhere,” Bayer says.

But in the end, the food industry, like any other group of employers in modern America, might find that raising wages is the only immediate, substantial solution to their labor woes.

“You can argue that it all comes down to money,” says Oklahoma State’s Peel. “If you pay enough, people will choose to work in those environments. And I think that’s some of what the pandemic has sort of forced on not only the meat or food industry, but probably in lots of ways in our economy.”

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