Help Wanted Desperately

When Steve Jacobus wanted to expand his company into a new line of business last year, he staked its future on Milwaukee's past. Jacobus, whose Olson Warehouse & Distribution Co. is in suburban Waukesha, located his new business—which packages goods for distribution—in an abandoned potato-chip factory that he leased in a run-down industrial sector of Milwaukee.

To be sure, operating in a rough part of Milwaukee's inner city presents inconveniences. But they are minor compared with the larger issue that motivated Jacobus' bold move: He had jobs to fill and no workers to fill them.

For over a year, the Olson company had participated in a state program designed to bring jobless people to eager employers. Vans transported workers from central Milwaukee, where the unemployment rate is higher, nearly 20 miles to worker-starved Waukesha. But the round trip, including bus transfers to and from the vans' pick-up locations, was taking some employees three to four hours a day.

"So we decided to locate our work where the people live," says Olson co-owner Jacobus, looking out at a team of two dozen people busily repackaging shampoo samples, toothpaste coupons, and other promotional materials for a mailing by the National Cheerleaders' Association. "It's worked out great for us and great for them."

Employers across America, faced with their own labor shortages, are taking equally inventive steps to fill vacant jobs. The nation's labor squeeze stems from a mix of economic, demographic, and social factors, producing the tightest labor market in memory for small businesses in many areas of the country.

The epicenter of the worker shortage is the Midwest, but no region of the country is immune to the problem. Small-business owners in cities including Dayton, Ohio; Cleveland; Kansas City, Mo.; and Milwaukee have noted in recent surveys that finding and keeping good workers is their greatest problem. Some development officials in the Midwest say the worker shortage is beginning to constrain economic growth.

"Six or seven years ago, people were looking at the Midwest for an abundance of labor at cheap rates because we were just recovering from crises both in the agricultural economy and in industry," says Mark Seckman, vice president of project development for the Cedar Rapids Area Chamber of Commerce, in Cedar Rapids, Iowa, where the unemployment rate is about 2.3 percent. "We're not in that position anymore."

The labor dearth is particularly frustrating to the current generation of smallbusiness owners and operators, who, according to many observers, are the best entrepreneurs and managers ever. "A tremendous polarization is occurring," says David Birch. He is president of Cognetics Inc., an economic-research firm in Cambridge, Mass., and is a leading analyst ofthe dynamics of growing companies. "There's an enormous and growing pool of... people who are very capable of stalling and running businesses well," Birch says. "But they have no one to go to work for them."

The shortage is serious enough to hold back the growth of many small companies. Last summer, for instance, an impatient customer stripped Cardinal Kitchens Inc. of a $50,000 contract after a scarcity of semiskilled workers prevented the company for weeks from manufacturing counter tops for a Louisville, Ky., school that was under construction for a fall opening. "We pulled practically anyone off the street that we could find, but they just wouldn't stay on," says Chuck O'Koon, owner and president of Louisville-based Cardinal. "They'd call in sick, they'd say they had to take their mother to the doctor—they'd give any old excuse."

In Delaware, beverage retailer Edwin Miller was driven out of business, he says, because of problems in keeping his operations staffed. Last year he sold three liquor stores because he couldn't keep enough responsible people working for him. Now he's selling his tavern restaurant as well. "I can't find qualified people, and sometimes I can't find j)eople at all," says Miller, who is moving on to another business, establishing sites on the Internet's World Wide Web. For company owners who don't want the kinds of problems that Miller experienced, addressing the labor shortage is not just a matter of determining to do something about it. Small-business people are finding that the problem and its solutions involve layers of complexities.

Nationwide, the unemployment rate at the end of 1995 was 5.6 percent, a significant decline from the June 1992 peak of 7.7 percent during the last recession. Most economists consider 5 percent to be "full employment," meaning that the only people without jobs are those who can't or don't want to work.

In many metropolitan areas and even throughout some states, unemployment rates are far below that level. Early this year, Chicago's unemployment rate was 4 percent; in Tallahassee, Fla., it was 3.7 percent; in Portland, Ore., 3.5 percent; in Danbury, Conn., 3.1 percent; in Little Rock, Ark., 3 percent; and in Salt Lake City-Ogden, Utah, 2.8 percent. Madison, Wis., led the nation with the lowest unemployment rate—1.5 percent.

Against the backdrop of nearly full employment, some analysts cite low wages as an impediment to recruiting workers. The inflation-adjusted average wage of Americans fell from $8.12 an hour in 1975 to $7.77 in 1985 and to $7.42 in 1995, according to data from the U.S. Bureau of Labor Statistics.

Gary Builless, a labor economist at the Brookings Institution, a public-policy research organization in Washington, D.C, says: "To business people who say they can't find good help anymore or 'They don't make them like they used to,' I have a suggestion: Why don't you pay the same real wage you were paying 20 years ago, when people were allegedly good enough?" The wage figures, however, do not inelude fringe benefits such as health  insurance, which have grown to 40 percent from 30 percent of total compensation over the past 20 years.

Business owners regard the suggested quick tlx of higher wages as flip. "The problem with simply raising wages is that doing so raises costs, and these days we have to be competitive on a worldwide basis," says Bi-uce Hackett, executive vice president and co-owner of Estee Mold & Die Co., a Dayton company that makes molds for manufacturers of ah- bags, steering wTheels, and other automotive components. On top of a cyclically robust economy, demographic factors have further restrained the number of qualified available workers. For one thing, the nation's birthrate skidded downward from 1964 to 1976. And it's those relatively scarce1 "baby busters" whom growing employers are counting on to fill most new jobs.

Just as vexing, many business owners say, is that most ofthe new "Generation X" workers—typically described as those born from the mid-'60s to the late 70s—especially those who don't attend college, are poorly prepared to make the transition from school to work.

For example, about 60 percent of highschool graduates who seek jobs at one major bank in Boston can't fill out the application form correctly, according to conomist Birch. The capability shortfall in the skilled-trades and technical areas, small-business people say, is particularly acute.

"Systematically, in manufacturing for instance, baby boomers are retiring early, and Generation X doesn't have the numbers or the skills," says Diane Swonk, an economist for the First Chicago NBD Corp. bank. "There's a mismatch between the kind of people we're generating and the skills they need." In addition, business owners almost universally complain that baby busters aren't as motivated or as dependable as workers of previous generations. With powerful forces such as those working against them, what are  smallbusiness owners to do about finding and keeping enough good workers? Here are approaches recommended by work-force specialists and small-business owners:

Look To The Inner City
Unemployment rates in the central cores of many cities remain high even as thousands of jobs go unfilled in suburbs just a few miles away. In Washington, D.C, for example, the unemployment rate was 8.9 percent at the end of 1995, while the rate in the Maryland and Virginia suburbs was just 3.3 percent. Similarly, unemployment was 10.3 percent in Cleveland but 4.2 percent in the suburbs, and 5.5 percent in Chicago but 3.3 percent in the suburbs. To Jeff Victor, such disparities represent opportunities. The Chicago company he co-owns, Treatment Products Ltd., a manufacturer of car-finishing liquids, employs about 20 people full time but can require more than 50 at a time to turn out big orders in short bursts.

So, two years ago, Victor moved the company from Chicago's western suburbs into the central city. Now he not only has an ample supply of labor but also has cut his rental costs. He figures that the formerly abandoned building his company now occupies costs him about one-third of what such a space would cost in the suburbs. "Most companies are going the other way," Victor says. "But we're a young, entrepreneurial company that is looking to expand. This is the place where we most easilv can do it."

Many business owners, of course, are discouraged from considering the kind of inner-city relocation that Victor undertook because they fear crime or they're concerned that their job tasks would be too complex for applicants whose education is insufficient. "There are typically many sound economic reasons why jobs are locating in the suburbs," says George Galster, a principal research associate at the Urban Institute, a Washington, D.C, public- policy research organization.

But Jacobus, of Olson Warehouse, is willing to try to overcome such obstacles to make his inner-city location viable and to help his new employees. "By now, weVe developed a core group of people who've been with us for the duration, and they want to do a good job and also encourage other people to do a good job," he says. "It's become a very worthwhile venture."

Become A Promoter
In metropolitan Milwaukee, some business owners are paying bonuses to churches where pastors will work the pews to recruit entry-level workers.

John Baraona, owner and president of Fussy Cleaners, based in Akron, Ohio, widely broadcasts his periodic offer of a free cleaning of a suit or dress for anyone who is out of work and needs the garment for a job interview; the person can take the clothing—and an unemployment-check stub—to any of his 23 stores in central Ohio.

Barbara Bissett, president and owner of Bissett Steel Co., in Valley View, Ohio, accepts job applications at all times, even when her 20-employee company, a distributor of steel products, doesn't have specific openings. "I'm always receptive, because that allows you better selectivity when you do need to fill an opening," says Bissett. She credits the practice with enabling her to sidestep the labor squeeze in the Cleveland area.

Near Dayton, Sue Ellen Ater makes a point of talking up her Huber Heights, Ohio, company at the community-college night courses she has taken in recent years. Her firm, Executive Mold Co., employs 18 people and makes molds for manufacturers. Many of her night-course classmates are mothers of high-school students who would make excellent job candidates for Executive Mold, joining the firm as toolmaking trainees.

Network With Educators
High-school teachers, guidance counselors, and administrators can be great ambassadors with their students on behalf of nearby companies and even for entire industries that are important in a community. They also can be helpful sources of recommendations on students who might make particularly good employees.

Daniel Marcus, co-owner and president of Encore Manufacturing Corp., in Cleveland, goes to the students. He lectures to high-school manufacturing-technology classes, which gives him a platform to discuss the industry and Encore's approach to career advancement, its tuition-reimbursement program, and other benefits his firm offers. Kids come up to us after class and say, 'Gee, it sounds like you've got a great company,' " says Marcus, whose firm employs about 65 people. "It opens lots of doors to young people, wrho then come in and apply for jobs."

Train Your Employees Yourself Resigned to what they see as the education system's inability to provide them with capable workers, many business owners are taking it on themselves to train workers much more extensively than before.

That often means stalling with the basics. For example, Camran Benji, co-owner of Benji Electronics Inc., a 20-person export and distribution company in Los Angeles, is willing to hire people with few if any qualifications and spend much time and money training them—often in remedial subjects—once they're in the door. It's too early to tell how well this approach will work in the long run. Glen O'Brien Moveable Partitions, a Kansas City-based manufacturer and installer of office panels, also offers training.

At the company's Dayton, Ohio, location, new installers enroll in a four-week apprenticeship program with a nearby vocational school. "It has elevated the performance of our employees, developed and retained the people who will help us, and weeded out those who aren't willing to put in the extra effort, because they have to go to school on their own time," says co-owner Steve Nichols.

Make All Your Employees Recruiters Many business owners are offering employees bonuses of $50 up to a few hundred dollars if they'll bring in a referral who sticks with the company. Charles Pappas, co-owner of Michael's Restaurant, in Rochester, Minn., has recruited members of two immigrant ethnic groups, Mexicans and Asians, who are populous in the community, wiiich had an unemployment rate of just 2.2 percent in November. They draw in others to work at the restaurant, which has 155 employees. "Not only do they tend to be good workers, but they're the best recruiters I could possibly have among their people," Pappas says.

Consider Untapped Groups Immigrant populations remain undertapped in many markets and can provide a steady stream of good workers. Baraona, of Fussy Cleaners, works with the Akron Jewish Center to help Russian immigrants stall new lives in the United States, and he gives them jobs.

But immigrants aren't the only untapped groups. Disabled people, for instance, are a growing source of new workers, especially as private and public programs help them develop marketable skills. Older people made up one of the "original" underemployed demographic groups, but their numbers and their employability are growing with time. Retailer John Mayer, for one, likes to hire retirees for part-time work at his firm, Kirk's Flowers, in Newark, Del. They usually aren't pushing for higher wages as younger people might be, he says, and they are likely to have medical coverage already.

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