Twin Cities area retailers weigh shorter hours to cope with high labor costs this holiday season

The smell of popcorn and candy hung heavy in the air as city workers looking for an after-work sugar fix and groups of families with sweet teeth to satisfy clamored into the downtown St. Paul Candyland on a recent weekday afternoon.

It takes a lot of help to run the nearly century-old confectionery, with its columns of popcorn tins and containers full of old-fashioned candy from butterscotch buttons to strawberry bonbons. Owner Brenda Lamb would like to find someone who could work solely as a cook manning the popper and stirring the popcorn kettles all day long.

But with the difficulties she's having just filling regular store positions, she might need to put that worker on her wish list for Santa.

Every holiday season brings challenges to find new employees, but this year Twin Cities retailers are struggling to pay them as well. Payroll costs have ballooned over the past year because of mandatory minimum wage hikes, benefits additions and increased wage competition.

To absorb the rising costs, local retailers are reassessing their staffing levels and may shorten some store hours during a shopping season that makes up a large chunk of their annual sales.

"Labor continues to not be abundant," said Bruce Nustad, president of the Minnesota Retailers Association. "It's just putting that pressure on retailers so they have to decide, 'Do I have enough people to work with this holiday season?' "

Retailers have dealt with a labor crunch for more than a year, so in some ways this holiday season is just solidifying this now-normal business challenge, Nustad said. Yet, while consumers are getting used to thinner staff in stores, that doesn't mean local retailers can afford to skimp on store experiences and customer service.

"If you can't win on price, you better win on service," Nustad said. "And if your labor opportunities are pinched, you have to figure out how to do that."

At Candyland, which is known for its Chicago Mix popcorn and other sweets, Lamb is trying to figure out the best recipe for staffing this holiday. She has about 50 employees who work across her three stores in downtown Minneapolis, St. Paul and Stillwater. As Lamb has checked off the merchandise she needs for the holiday season, it's her payroll that still needs some work.

"The biggest challenge is getting good employees," she said. "Sometimes they don't stay around very long."

In Minneapolis and St. Paul, Lamb has seen mandated minimum wages continue to rise this year, with St. Paul increasing to $13 for small businesses and $15 for large shops and Minneapolis upping its minimum wage to $14.50 for small businesses and $15.19 for larger companies.

Lamb said the added business cost has been difficult to swallow, especially when she has to pay more than she wants for younger employees just starting who lack experience and sometimes the commitment to consistently show up for work, she said. She said politicians should leave benefits and wage improvement decisions up to employers.

"Small businesses, they are damaging them incredibly," Lamb said. "It should be our decision."

Sick pay costs have also increased in the past couple of years. Product costs have also gone up about 50%, and prices for oil and cheese products continue to rise.

In rare cases when Lamb doesn't have enough workers, especially if someone calls in sick, she has to close stores early.

Sales at local mall staple Games by James are down a little bit compared to last year, but payroll expenses are way up. Owner Logan McKee estimated his hourly wages have gone up 25% year-over-year.

During the past two years, McKee added employee benefits like paid time off as well as supplemental insurance for vision, dental and life insurance to help make his game stores a more attractive place to work.

"It's having a big impact on my bottom line," McKee said. "I don't really see a way around it. I need to retain my people."

Tyler Conrad, owner of GoodThings gifts and apparel boutiques, said in the company's 50-year history, this year has been the worst for securing workers. The number of applicants has decreased as well as the quality of those who apply, he said.

"This has to be the hardest year we had to find help and hire," Conrad said. "It has been a huge struggle at all the store levels."

But things have started to look up for GoodThings, which recently found a lot of good hires in time for the holiday season. The last few months of the year account for half of the retailer's yearly business.

Many people apply to GoodThings for the store discounts and the atmosphere, Conrad said — intangible benefits that can edge out competition from other potential employers.

"It's the culture and the image," he said. "We have to have people who are friendly and warm and represent who we are as a family business and as a company."

Conrad might have been in a tough spot opening the new GoodThings Cafe this week in the former Grandma's Bakery on 4th Street in White Bear Lake if it wasn't for the fact that he was able to rehire many of the old Grandma's employees.

Minimum wage increases in the Twin Cities have hampered job growth at retailers, researchers have found.

According to a recent report by the Federal Reserve Bank of Minneapolis, as local minimum wage laws in Minneapolis and St. Paul began to take effect, jobs dropped between about 23- 29% and hours worked declined about 21-42% in retail businesses from 2018 to 2021.

Nationally, retailers are also reporting higher labor costs as they improve wages and benefits to compete for workers.

Home Depot announced earlier this year that it would invest $1 billion to keeps its wages and benefits competitive. In August, Dollar General announced it would increase its investment in labor from about $100 million this year to about $150 million to increase its worker hours. Other retailers such as Walmart, Dollar Tree and Minneapolis-based Target have continued to increase their starting wages and benefits in recent years.

Early last year, Target announced it would offer $15 to $24 an hour to new workers and expand its full health care benefits to more workers and reduce the time it takes before new employees are eligible for benefits. Target plans to hire up to 100,000 seasonal workers nationally in stores and supply chain facilities this year, the same number as last year.