All Hands on Deck!

By Barbara Rudolph

Scott Scarpato, vice president of Automatic Laundry Service in Newton, Mass., was in a desperate hurry to hire a new field-service worker to repair the equipment his company sells and leases. So he placed a help-wanted ad that offered plenty of come-ons: a starting wage of up to $9 an hour, plus profit sharing, a pension plan and full medical coverage. After three weeks, the ad drew responses from only five people, none of whom was remotely qualified for the position. Says Scarpato: "One applicant had a severe drinking problem. Three could not speak or read English. And the last one wanted $12 an hour, even though he had no experience." Three months later, Scarpato is still trying to fill the slot.

He is not alone. The U.S. economy's nearly six-year-old expansion has created so many new jobs (more than 15 million) that numerous companies cannot find people to fill them. The worker shortage extends from chambermaids to nurses' aides, cashiers to engineers. California amusement parks, Connecticut insurance conglomerates and many others are scrambling to staff their operations any way they can. Employers are boosting salaries, allowing flexible schedules, recruiting elderly workers and teaching English to recent immigrants. For the moment, the shortage has put no brake on the overall U.S. economy. But if the supply grows tighter and forces employers to pay ever steeper wages, the situation could help spark a resurgence of inflation.

Joblessness is at its lowest level since 1974. The Labor Department reported last week that the unemployment rate dropped to 5.3% in June, down from 5.6% the previous month. Barry Bosworth, an economist at the Brookings Institution, thinks the jobless level is approaching the threshold at which it begins to spur wage and price increases. Says he: "I like an unemployment rate of 5.3%, but if it goes below 5%, then I would be concerned." Yet other economists think the work force can readily accommodate the scattered shortages. Says Beryl Sprinkel, chairman of the President's Council of Economic Advisers: "We have a flexible labor market. Individuals do move from areas of temporary surplus into areas of so-called shortage."

Demand for workers is most acute in New England, with a 3.3% rate of unemployment. In New Hampshire the figure is 2.3%, the lowest in the U.S. The region's economy has been fueled by military contractors, who benefited from the defense buildup of the early 1980s, and by the small firms that have flourished in the high-tech corridor along Route 128, near Boston. The explosive expansion in the demand for labor has far exceeded the region's growth in supply. In Massachusetts, for example, the number of jobs grew 11.6% between 1980 and 1986, while the population increased only 1.7%. Other shorthanded states range from South Dakota (jobless rate: 2.7%) to Hawaii (2.9%) to North Carolina (3.4%).

Not all state economies are so robust, of course. Unemployment in West Virginia stands at 9.7%, largely because of a loss of jobs in the coal industry and manufacturing. In Kentucky the rate is 8.6%. Yet almost everywhere, summer travel has brought a labor crunch in the resort and recreation industries. Dishwashers, floor sweepers and busboys have become as rare as teenagers in summer school. Says Cheryl Winters, manager of the Gwinnett County office of the Georgia department of labor: "There are essentially no domestic workers. They have gone with the wind." The situation . is not expected to improve over last year, when a privately funded study of Cape Cod, Mass., companies reported a shortage of 14,000 chambermaids, short- order cooks, waiters, clerks and other entry-level workers in that area. The survey, conducted by a public agency, the Office for Job Partnerships, calculated that businesses lost $48 million. This summer Cape Cod restaurants and motels are posting signs that read, 15-YEAR-OLDS WELCOME TO APPLY, an appeal that was unheard of just a few years ago.

Even professionals and salaried workers are hard to find. Elementary school teachers, nurses and secretaries, long underpaid and underappreciated, are being wooed with much more favorable terms. At the same time, cyclical industries that have been through dry spells during the past few years are coming back only to find their labor forces depleted. Many workers from the long-depressed oil-and-gas industry found new careers after they were laid off, and do not care to return to the unpredictable energy business. Texas- based Zapata Gulf Marine, whose tugs supply offshore rigs, has been forced to lay up three of its 354 ships because it cannot find chief engineers to staff them.

The main cause of the shortage is the baby bust. The low birthrates of the late 1960s and early 1970s mean that there are fewer teenagers and college-age students available today to take on the tedious service-industry tasks of chopping vegetables for salad bars, flipping hamburgers or feeding insurance claims into a computer. Twelve years ago, when Bill and Sydna Zeliff bought their Christmas Farm Inn in Jackson, N.H., they could choose among six candidates for each opening. Now, says Sydna, "we hire almost anyone we can get."

Many employers see enough applicants, but far too few of them have the basic skills -- reading, writing and arithmetic -- to handle jobs in an economy that increasingly runs on technology and information. Scarpato, the laundry-machine vendor, contends that he encounters high school graduates who sit down with a job application and ask what the word address means. Says Scarpato: "If they can't read, I can't train them to follow a wiring diagram and repair machinery."

Since manpower shortages can crimp a company's ability to grow, many businesses have started recruiting as actively as the Army or the Navy does. To attract engineers, Compaq, a fast-expanding computer manufacturer, has chosen the old-fashioned hard sell. For a three-day recruiting drive in Dallas, Compaq sent invitations to 3,000 engineers and blanketed the region with radio and print advertisements. To promote the company's picturesque headquarters, set in a forest in Houston, Compaq imported pine and sweet gum trees, along with park benches and lampposts. The price tag for the extravaganza: $100,000.

Of course, higher wages are usually the simplest and most effective way to entice workers. Jobs that once offered not a penny more than minimum wage -- currently $3.35 an hour -- these days bring more than twice that sum. Servers at some Burger King outlets in Massachusetts start at $8 an hour and receive raises of 25 cents an hour for every 90 days they work. Beyond that, they receive $1 an hour toward child care and can buy discount memberships at local health clubs.

Some economists believe most service companies, including fast-food chains and hotels, will be forced to raise wages over the next few years. Says Abel Feinstein, an economist at the Michigan Employment Security Commission: "There is no shortage of people to fill these service-sector jobs. If you increase wages and improve the working conditions, you won't have a shortage anymore."

Many businesses resist raising wages, fearing that the higher cost will put them at a disadvantage vis-a-vis their competitors. But the minimum wage may be moving up. Congress is debating a bill that would increase the minimum 30 cents to 40 cents an hour each year for the next three years, bringing the rate to $4.55 by 1991. Supporters of the legislation contend that workers need the boost to keep up with rising prices, since the minimum wage has lost 22% of its purchasing power since the last increase in 1981. Opponents, including business lobbyists, believe the hike will hurt labor-intensive enterprises and set off an inflationary spiral.

To sweeten offers, many employers supplement higher wages with such incentives as hiring bonuses, free trips and job training. Flexible schedules are increasingly appealing to those from two-income families. Von's, a California grocery chain, had trouble finding enough students and other young people to fill its 16-hour-a-week schedules for baggers and clerks, so it expanded the workweek for those jobs up to 32 hours, which can be arranged to the employee's liking. The purpose: to attract homemakers, retirees and other people looking for supplemental income.

Since many regions suffer from a geographical mismatch, in which unemployed < youths in inner cities are unable to reach affluent suburbs where workers are needed, some employers are hauling in their work force in buses and vans. Magic Mountain, an amusement park 45 minutes north of Los Angeles, runs a bus during the summer that carries teenagers to work from the Lincoln Heights neighborhood in East Los Angeles. Allstate Insurance operates 54 van routes to bring 600 employees to its headquarters in the Chicago suburb of Northbrook from their homes as far away as southern Wisconsin and northern Indiana. The routes, which go door to door, are changed whenever a new recruit needs a ride.

Some firms look even farther afield and try to recruit workers outside their region. But often the chief obstacle to attracting new employees is the high cost of housing, so some potential employers have tried to compensate. An auto-parts division of Textron based in Dover, N.H., gives some of its new white-collar employees short-term "bridge" loans for housing at below-market interest rates. Last year the state's average home price was $136,000, nearly 60% higher than the U.S. median.

The labor shortage provides an incentive for companies to retain the good employees they already have and move them up. Many employers are bolstering their training programs. At its Santa Ana, Calif., electronics division, ITT has conducted English-language classes for hundreds of its foreign-born employees, most of them Hispanic or Asian. The Travelers Companies, a Hartford, Conn., insurance firm, conducts training programs in modern office skills and business English.

Among the ranks of new employees are a growing number of elderly workers. Messenger services in Los Angeles are using retirees for local deliveries, and Bullock's department store has been seeking older people to work as clerks. Many companies are also turning to employees who are mentally retarded or emotionally disturbed but still capable of working with the help of close supervision. Lotus Development Corp., a computer-software firm, has some 120 such workers in its plant in Cambridge, Mass., packaging software for shipment.

The labor gaps are likely to persist through the 1990s. That prospect has helped spur Congress to move on a welfare-reform package that would require many recipients to go to work. The Senate last month passed such a bill by a vote of 93 to 3, and it will now go into a conference committee to be reconciled with an earlier House version. Encouraging welfare recipients to * work has many compelling purposes, among them restoring pride and saving money, but the labor itself could be valuable as well. Said Arkansas Governor Bill Clinton in support of the measure: "The overriding concern is that we really don't have a person to waste in this country."

In the next few years, the rising costs of wages and benefits could force companies to charge more for their products. At this point, the labor shortage is still too scattered to create an overall inflation problem. But that is small consolation for business owners who are forced to turn away customers because they cannot find the workers they need.

With reporting by Edward W. Desmond/New York and Shelagh Donoghue/Chicago