Wage Escalation Trends for Warehouse Workers in 2021

While California has garnered the most headlines over the past couple years as the first state to commit to raising the minimum wage to $15 (albeit gradually), other states have followed a similar suit. Several other states have plans to phase up to a $15 minimum wage, and the topic has reached national discussion by the new presidential administration. Distribution employers are trying to stay ahead of these mandates to control costs in the coming years. Site Selection Group, a leading location advisory, real estate and economic incentive services firm, monitors wage escalation trends in the distribution center industry to understand their impact on overall workforce conditions.

Distribution center activity heavily gravitates to populated markets

Due to a variety of factors including access to consumers, availability of workers and robust transportation networks, most distribution center activity is geographically focused on large metro areas. For this reason, SSG researched those metros with a population over 500,000 when assessing wage inflation to determine how it correlates to occupation concentration. There are 109 metro areas in the United States that fall into this population category.

According to the Emsi, the average annual wage inflation for distribution center occupations over the past five years is 3%. Although this number seems low given Site Selection Group’s recent project experience, it is the best relative indicator from one metro area to another over time. Conventional thought would be that wage inflation is higher in markets that have high distribution center activity as the competition for employment is greater. To evaluate activity, Site Selection Group looked at the simplistic metric of a location quotient which compares a metro area’s concentration of employment to that of the national average.

Wage escalation does not discriminate against regions

The following table shows the 10 metro areas with the highest five-year average wage escalation. There is some geographic diversity among these communities, but both California and Texas have two metro areas each in the top 10, which is a reasonable result given the geographic positioning and population mass within these states.

Source: Emsi, Transportation and Material Moving Occupations

The following table shows the 10 metro areas with the lowest five-year average wage escalation. Again, there is large geographic diversity in the results, but SSG expects trends to shift over the next few years with minimum wage increases.

Finding areas with talent but modest wage escalation

In the battle to hire and retain a qualified workforce, distribution center operators need to balance finding markets with trained talent with those that have manageable workforce costs. The following table shows the 10 metro areas with the highest location quotient that have a historical average wage escalation below the average of 2.3%. Surprisingly, this includes legacy distribution center markets such as Memphis, Louisville and Indianapolis.

The following interactive map includes concentration and wage escalation data for all 109 metro areas with a population greater than 500,000. Hover over a point for more details.