Changing Demographics and Labor Costs in the Wine Industry
It’s no secret that the costs of labor are rapidly rising. Wage growth reached an all-time high of 14.8% annualized in April of 2021, as the United States began emerging from the COVID-19 pandemic. While the rebound from high unemployment and depressed wages during the depths of the pandemic certainly played a role in boosting that statistic (as well as trillions of dollars in stimulus) there is a real, structural reason for wages to rise – and continue rising – for the foreseeable future. The pandemic and market distortions that occurred in its aftermath did not directly cause the changes in the labor market, but merely caused an abrupt acceleration of trends that were already occurring. Many of the baby boomers who were laid off and close to retirement age took the unemployment benefits and COVID stimulus until they ran out, and then switched over to social security, effectively “robbing” the US labor force of its last few years of easy hiring.
Simply put, the baby boomers are retiring, liquidating their assets, and are ready to spend – and there are not enough young people or immigrants entering the US labor force to replace them and produce the goods and services for which they will drive demand. The flip side of high wage growth is high inflation, which tend to reinforce one another as higher prices cause workers (in times of labor scarcity) to demand higher wages, which in turn raises input costs for goods and services, and thereby prices. This upward cycle will be worsened by two additional factors. First, the millennials (our second largest generation after the boomers) are finally starting to hit their peak childbearing years, which begins the period of peak consumption in most people’s lives (kids are really darn expensive). Second, gen Z, the current cohort entering the labor market, is our smallest generation, and has a lower level of workforce participation than any previous generation before it. While the children the millennials are currently having might eventually arrive to the labor force in large enough numbers to start mitigating (or even reversing) this problem, it’s going to be twenty years before they begin participating in the labor market in any meaningful way AND a certain portion of currently working millennials are likely going to temporarily drop our of the labor force (or at least reduce their work hours) for a period of a few years after becoming parents. The problems of labor shortages, wage growth, and entrenched inflation are here for the foreseeable future, and the structural factors driving them are likely to get worse before they get better.
So, what does all of this mean for your business? Are we doomed to spiraling costs and prices increasing until we reach a level where demand collapses, and our livelihoods with it? The short answer is no.
The longer answer is that the only way we are going to avoid that fate in the short to medium term is to innovate and automate our way out of this problem – and for those who can find a way to meet demand for their goods and services with fewer inputs, the rewards will be immense. This period we are entering into is as much an opportunity as it is a crisis.
One example of a product that combines both innovation as well as automation in the wine industry is the Barrel Monkey. The Barrel Monkey is a device that automatically tops and fills wine barrels, at the push of a button. It cuts topping times (and labor hours) by half or more, eliminates spills / cleanup and lost product, and makes topping a one-handed operation (meaning that employees no longer have to balance on a ladder while leaning precariously over a barrel 10 feet off the ground with one hand on a topping wand, the other on the valve, and a flashlight in their mouth). To learn more about the Barrel Monkey, see our product page.