Stephen Boyd had a problem. Despite burgeoning demand for cannabis edibles, drinks and other items made at Growpacker, his Desert Hot Springs marijuana product packaging business, he was struggling to hire and retain staff.
Although Boyd had raised wages across his company — with most entry-level employees now making $16 per hour, above minimum wage — competition from other businesses was continuing to draw workers away.
“We’ve had people just not show up for work one day,” said Boyd, the company’s founder and CEO. “We found out that they got jobs as bartenders (or servers), making more money on tips.”
So Boyd decided to sweeten the deal for employees with what he had on hand: weed.
Around early June, Growpacker began giving employees 50-60% discounts on cannabis products such as weed gummies, cannabis cookies, soft drinks and marijuana flower. Boyd said that many staff members were excited about the program and that it has helped with employee retention.
Boyd’s company is one of many Coachella Valley businesses turning to creative solutions to draw in workers amid a protracted tight labor market.
According to the Labor Department, there were 9.2 million jobs open in May — the latest month for which data were available. That was down only slightly from the record 9.3 million nationwide job openings in April.
Experts say factors such as pandemic-accelerated retirements, ongoing elevated unemployment payments and the unexpectedly fast rebound of consumer demand this spring have strained the supply of workers across many industries. Competition among employers for this smaller labor pool has prompted many companies to raise wages, while others experiment with incentives such as sign-on bonuses, perfect-attendance raffles and — in Boyd’s case — discounted pot.
Pot and stock
Cash is expensive in the cannabis industry. Since the product is still illegal under federal law, those willing to provide capital to cannabis businesses tend to charge steep fees to compensate for the risk.
“A dollar [costs us] $1.15,” Boyd said. “It makes it hard to flip that cash over.”
That makes it challenging for Boyd to raise wages. While searching for less cash-intensive ways to make his business competitive with other employers, Boyd said he landed on the idea of using the company’s readily available pot supplies.
Boyd’s company operates a manufacturing and distribution facility for cannabis products, including THC-infused soft drinks, foodstuffs and beer. It packages these items, alongside standard smokable cannabis, in client businesses’ preferred branded packaging for later retail sale. According to Boyd, many industry workers also consume cannabis, creating an opportunity to turn a cost center into an attractive employee benefit.
Growpacker opened the “commissary” for its 75 employees around early June, Boyd said, offering more than half off on pot products from their retail price. The company even delivers directly to employees’ houses, according to Boyd.
“We (decided we) are just going to ‘pay’ people in cannabis,” he said. “Instead of a person thinking that they are making an extra dollar an hour … they are getting perceived value of $100 or $200 in cannabis savings.”
For some employees who didn’t find the discounted products a strong enough incentive, Boyd said he has even offered stock in his company. He said his bet is that these stock options, which vest quarterly over a period of two years, will give staff a stake in the company’s future and promote long-term loyalty — all while saving hard-to-come-by cash.
“Say in a month we had to pay an extra $25,000 in wages,” he said. “Instead of doing that, we use these different tactics to gain more perceived value to the employee.”
“At the end of the day,” he added, “what matters is liquidity.”
Throwing money at it
For companies with more readily available supplies of cash, like the $7.5 billion Hyatt Hotels Corp., sign-on bonuses have become a popular way to draw in new workers.
Like many hospitality businesses, Mike Waddell, general manager of the Hyatt Regency Indian Wells Resort and Spa, said his hotel was caught off guard by the rapid rebound in consumer demand in the spring.
“We’re all fishing for a small pool of individuals,” he said, adding that all of the hotels in the area were “in the same boat.”
Waddell said his hotel put a $750 signing bonus in place for lifeguards and housekeeping staff in May due to “an extreme need” in those two areas. The payments are made in installments of $250 after an employee’s first 30, 60 and 90 days, according to Waddell.
Both lifeguards and housekeepers at the Hyatt Indian Wells make $15.50 per hour, above the state’s $14 minimum wage for businesses with more than 25 employees.
“I like to think we have a leg-up on those” hotels that aren’t doing sign-on bonuses, Waddell said.
The general manager said his hotel’s lifeguard shortage was compounded by a “perfect storm” of factors.
Before the pandemic, the hotel did not employ lifeguards at its pools. But last August, the Hyatt added two 40-foot water slides and a lazy river, which necessitated lifeguard staff.
The new attractions have been popular, according to Waddell, but guests can’t use them in the evenings because the hotel has been unable to hire enough lifeguards. The slides and lazy river are currently only open from 10 a.m. to 6 p.m.
“We would like to open them (from) 9 a.m. to 10 p.m. during the summer,” Waddell said.
These factors have coincided with an unusually high volume of summer visitors, according to Waddell, leaving hotels like his desperate for workers during what are typically their slowest months.
Other desert businesses have been even more aggressive with their sign-on bonuses.
Uber, which has been caught in a nationwide driver shortage in recent months, is offering $1,700 sign-on bonuses for new Uber Eats drivers in the Palm Springs area who complete 100 deliveries in their first 90 days.
The Morongo Casino Resort and Spa is offering $1,000 sign-on bonuses for a wide range of positions including cashiers, clerks and housekeepers. Palm Desert-based All Seasons Heating, Air Conditioning and Plumbing recently added $2,000 sign-on bonuses for plumbers and qualified heating, ventilation and air conditioning technicians.
All Seasons is also offering $2,000 referral bonuses to staff who recommend a successful candidate, resulting in payouts of up to $4,000 for new staff, according to Marketing Manager Todd Schufelt, who said the program has resulted in seven new hires in the last month.
“Now, would I rather not do that? Of course,” Schufelt said of the bonuses. “But we’re doing what’s necessary and it’s working.”
Playing the long game?
Other desert employers have eschewed up-front cash as an overly blunt instrument.
Alicia Wilkins, Coachella Valley branch manager at Southern California staffing agency AtWork, said her company has turned to promoting higher wages among its clients as well as attendance-based incentives and referral bonuses to encourage longer-term relationships between workers and employers.
“When we were coming out of COVID, a lot of employers were looking to offer pre-COVID wages,” she said. “That’s just not feasible anymore. There is just so much demand out there.”
Wilkins said her company has undertaken wage surveys for several of its clients to help them understand the new going rates for workers in different roles.
“With the labor pool being so tight across every industry, if you pay the most, you get better people,” she said. “If you pay the least, you are getting people who have been passed on by others.”
Many of AtWorks’ clients have taken her advice, according to Wilkins, and raised wages for some or all positions.
To complement recruitment efforts, AtWork is also offering referral bonuses for a range of roles. Wilkins said some local AtWork workers have “cashed in on hundreds of dollars in referral bonuses with their uncles, siblings or friends.”
Her company also recently began to hold $500 raffles for workers with perfect attendance, according to Wilkins, the first of which was won by a local warehouse worker last week.
Wilkins said she believes these types of incentives are better suited to building long-term relationships between workers and employers than frontloaded cash payments.
“If you offer people sign-on bonuses or all these gimmicky things, are you just getting people that are coming for that?” she said. “If employers can look at the wage scale and make sure they are being competitive, I think that is putting them in a better place.”
She suggested that local businesses could also implement initiatives such as 90-day pay reviews or perfect attendance bonuses to “show commitment on both sides.”
For some particularly at-need sectors, Wilkins said AtWork has also begun casting its net beyond its typical candidate pool.
“We have reached out to high schools for summer work (opportunities),” she said. “A lot of our employers are (now) willing to accept younger people than they would in the past.”
She said her agency currently employs about 15 Xavier College Preparatory High School students for summer jobs.
“We’ve had to get very creative,” she said.
Labor market disconnect
It’s too early to say with certainty which — if any — of the employment incentives offered by local companies have been the most effective.
Data from the California Employment Development Department suggests that there is still a significant pool of untapped labor in the region, which may or may not be accessible if enough sweeteners are put on the table.
Riverside County had an unemployment rate of 7.9% in June, according to the EDD. While that is a significant improvement on last June’s 13.7% unemployment rate, it is still 3.5 percentage points above the county’s pre-pandemic unemployment rate in June 2019.
Several factors are likely contributing to this labor market disconnect, according to David Smith, a labor economist at Pepperdine University.
Smith pointed to ongoing boosted unemployment payments and summer school closures as two temporary factors likely keeping some people out of work. He said those issues would likely ease in the coming months as the higher unemployment benefits — which allow Californians to collect up to $750 per week — expire and schools reopen for the fall.
“We have longer-term issues,” Smith said, “such as people making long-term decisions about retirement and skill mismatches.”
The economist said that people who decided to fast-track retirement plans under COVID are not being replaced by an equal number of young people entering the job market. He said many available workers do not have the qualifications for certain open positions, particularly “traditional trade-type jobs” — such as plumbers or electricians.
Despite these thorny labor “bottlenecks,” Smith said there could be a silver lining to the current labor shortage — at least for employees.
“One of the puzzles (of the last several decades) has been, even with good company profits, why aren’t workers seeing more of the benefits that come from robust economic activity?” he said.
In 2018, the Pew Research Center reported that the inflation-adjusted U.S. average hourly wage had about the same purchasing power as it did in 1978. Smith said this long-running wage stagnation could be especially difficult for low-paid workers in California, who have to contend with high housing and cost-of-living expenses.
“My expectation would be that we are going to see more robust year-over-year (wage) growth than we have in the past,” he said.
Smith said the tight labor market was also likely to shift power into the hands of workers more generally, giving them additional leverage in negotiating working conditions.
“At the lower end of the pay scale, those jobs were often not flexible” in terms of hours, location or other accommodations, Smith said. “Employers might need to rethink that.”
Smith noted, however, that whether the changes are a new paradigm, or a temporary COVID anomaly, “remains to be seen.”
James B. Cutchin covers business in the Coachella Valley. Reach him at email@example.com.