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Jobs in need of workers Workplace: Although downsizing is still alive, many companies are scrambling for employees. In fact, unemployment is at a six-year low, which means higher wages and concern about inflation.

THE BALTIMORE SUN

The country's most sought-after rarities this year aren't Florida oranges, America Online connections or decent left-handed pitching. They're elbow grease, brow sweat and brain power.

For the first time in almost a decade, Malynda H. Madzel is having trouble hiring the people she needs for her Columbia telemarketing company.

"When everybody was downsizing, we had people who filtered through while they were looking for other work," said Madzel, the 26-person company's president. "Now that there isn't so much downsizing, a lot of these folks are well taken care of. It's not as easy to find the good people that we want."

The lowest unemployment rates in six years are forcing many companies to search harder for workers, pay more and sometimes settle for less.

Although inflation has been subdued for years, some economists think that the labor drought is getting worse and could prompt a sharp cost-of-living spike this year as higher wages are factored into prices.

"Eleven percent of the firms we survey can't find the workers they need," said University of Baltimore economist Richard Clinch, who regularly polls hundreds of Maryland companies about business conditions. "Labor issues rank higher than tax issues" among employers' concerns, he said.

The dearth is especially severe among engineers, machinists, lab technicians and other high-tech workers.

"I'm looking for three more people right now, and I can't get them," said Patrick Huddie, chief executive of Microcosm Inc., a Columbia supplier of optical-imaging systems to the semiconductor and medical instruments industries. "We're trying to grow our company by 50 percent, and it's just not possible." But the shortages are felt in many fields, from retailing to advertising, education to transportation.

Baltimore ad agency Trahan, Burden & Charles just landed some big accounts and wants to hire between 15 and 20 people in the next three months.

"But it's hard to hire all the people we need," said Robert Matz, TBC's president. "The climate for the kind of people we're looking for is not as plentiful as it was two or three years ago. I think the other guys in our business would say the same thing."

The labor pinch is nationwide. Although U.S. companies continue to announce huge layoffs, as shown by American Express' move several days ago to shed 3,300 employees, analysts say the trend of corporate downsizing has slowed.

And the labor drought in Maryland and some Northeastern states is especially noteworthy.

Maryland recovered extremely slowly from the recession of the early 1990s. Now, the presence of its best job market of the decade suggests that the state is participating more fully in the country's commercial vitality.

But it also may contain the seeds of its own end. For two years now, economists have worried that a growing shortage of workers would start to hinder U.S. growth, drive up wages, stoke inflation, boost interest rates and kill the national expansion.

It hasn't happened yet, as noted by the recent U.S. Labor Department report that employer costs rose only slightly in the fourth quarter. But the fact that even the nation's more sluggish pockets are now begging for labor may mean that the expansion is finally, indeed, pushing its bounds.

"There's probably an upward bias of wage and price growth," said John Zaehringer, chief economist for Loomis, Sayles & Co., a Boston investment house. "By most measures we're a little above full employment. The historical perspective suggests that the piper has to be paid."

Unemployment plunged in Maryland last year, from 5.1 percent at the end of 1995 to 4.4 percent last December. The last time Maryland unemployment was 4.4 percent was in May 1990. Nationally, unemployment fell to 5.4 percent in January from 5.8 percent a year earlier.

For available labor and brains, it's a sellers' market. The Sun's help-wanted section booked its highest volume in at least five years last year.

And people willing to switch companies, especially in the affluent counties near Baltimore and Washington, are increasingly able to parlay the move into a pay raise.

Not long ago, store managers in a typical Maryland mall could be had for $25,000 a year, said Mark Millman, president of Millman Search Group, a Baltimore County firm that places retail executives nationwide. "They're up now approaching the $30,000 range," Millman said.

"Salaries have definitely gone up, all over the country. And definitely in this area."

At Kenlee Precision Corp. in Baltimore, good machinists can make $40,000 to $50,000 a year and pay "is edging up. It's going up, there's no question about it," said owner Kenneth A. Lewis Sr.

At Custom Telemarketing Services in Columbia, Madzel had to boost starting pay for her telephone reps from $6 an hour to $7.50 after she discovered that local McDonald's restaurants were starting people at $7.

She once had a ready pool of articulate, educated people eager to work the part-time hours she offered. But lately more of her candidates have been able to find full-time positions or equally lucrative part-time slots elsewhere.

It's a pickle familiar to telephone marketers, delivery companies, retailers and other concerns employing part-timers and offering below-average pay. In many cases, they've been priced out of the labor market as their prospects have landed positions one level up on the job ladder.

"There has been a slowdown in the lower-paying jobs and a pickup in the higher-paying jobs. That's nationwide," said Mark Vitner, an economist with First Union Corp. in Charlotte, N.C. "That's why restaurants and retailers are screaming so much for workers.

"The people that were working there are finding jobs in customer-service centers, law firms, financial services."

Target, the discount department-store chain that moved into metro Baltimore last year, pays $5.50 an hour to start in most stores and offers raises of up to 45 cents an hour after three months.

But, in some places with very low unemployment and many competing retailers, Target has to pay more. "The market is very wage sensitive," said Carol Freitag, the chain's regional personnel director. "The potential team member for us is very conscious of the start rate and will go to another employer for a quarter."

Competition for lower-tier workers isn't as intense in Washington, Baltimore City and some of Maryland's less-affluent counties. But for central Maryland's suburbs, the shortage has made the recent increase in the minimum hourly wage from $4.25 to $4.75 irrelevant.

Trucking companies here are especially pressed, said Robert T. Sweet, chief economist for Allied Investment Advisors in Baltimore. "They're having to pay people a lot more than minimum wage," he said. "Ten to 11 bucks an hour to get people that they can rely on."

But perhaps the biggest demand is for computer technicians, engineers and other high-tech people.

"In the computer market, people are jumping ship to other companies and getting $10,000 raises," said Microcosm's Huddie. "My own experience is that people are negotiating hard for significant increases from where they are before you hire them."

And the high-tech talent pinch may get worse. "I don't think the East Coast has quite hit it yet," said Patricia Keeton, who scouts out employer needs for Howard County Community College, a key source of regional tech training. "I think in the next year we're really going to see a shortage of workers."

Besides possibly prompting inflation, labor scarcity is keeping the economy from growing as fast as it might. Gross domestic product can expand only as fast as the work force and productivity do, and economists cite labor shortages as the single biggest factor in a sharp economic deceleration in the South last year.

Take Huddie's company. Microcosm, and the computer technology sector as a whole, have all the demand they need to grow boomingly.

They just can't meet it. "It's been slowed down by the lack of the right people," Huddie said. "It's almost a zero-sum game because the way you hire people now is you have them head-hunted. So you're taking them out of the labor pool for someone else."

But it is the pay raises some workers are commanding that most worry stock and bond investors and the Federal Reserve, the nation's central bank. Labor expenses make up about two-thirds of the price of a product, and inflation hawks think that the raises will eventually hit consumers in the wallet.

Economists have long believed that inflation pressures would mount whenever national unemployment fell below 6.5 percent or 6 percent. U.S. unemployment was 5.3 percent in December, and it has been less than 6 percent for almost two and a half years.

Worker raises have been skinny since 1994, surprising analysts who expected inflationary warnings to start flashing by now. Wages and benefits rose by just 2.9 percent last year and by 2.7 percent in 1995, according to the U.S. Labor Department.

But much of the flatness had to do with tame benefits costs. Employers are quashing health expenses by herding workers into HMOs, and the booming stock market means companies don't have to put as much into pension plans.

Wages and salaries alone, on the other hand, edged up by 3.3 percent last year, and many analysts expect them to increase by even more this year.

An inflationary spurt could hurt the economy by driving up interest rates, which would dampen investment by consumers and businesses. Inflation makes interest rates rise because lenders demand extra return to make up for declining value of their principal.

Higher inflation is by no means assured, however.

Some economists believe that the economy could slow down by itself this year, relieving inflationary pressures. And even if it doesn't, analysts increasingly think that the inflationary trigger isn't as sensitive as it once was.

In the globalized economy, they believe, neither workers nor merchants are secure enough to demand significantly higher prices.

Workers haven't forgotten about corporate downsizing and jobs moving offshore. And "if retailers raise prices, they're going to lose their customer," Millman said. "Absolutely lose their customer."

Still, don't forget those Maryland companies, wallowing in new orders, keenly seeking the talent to fill them.

"Yes, it's true," said Kenlee's Lewis. "Certainly you need to pay for what you get."

"When our cost structure is 65 percent labor, you've got to be careful," said TBC's Matz. But, he added, "Obviously, we are paying more for the better people."

Pub Date: 2/09/97

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