After a couple years of pandemic-related pressures, will US-based call centers finally catch a break?
The customer service industry has not been exempt from the constant poundings provided by inflation over the past few years. In a business where wages account for most of the operating costs, a deadly combo of high attrition, a tighter job market, climbing cost of living and higher expenses has been rocking operators all over the US.
The numbers paint a concerning picture. Overall inflation for onshore customer support operations climbed between 7% and 11% over the past 12 months, according to data gathered by Everest Group.
Site Selection Group’s numbers show that entry wages in tier-1 US cities jumped from US$12-US$14 an hour pre-COVID to US$15-US$17 an hour post-COVID, a 25% increase. In tier-2 cities, entry-level wages are hovering around US$15-$US16 an hour.
Although inflation has undoubtedly exerted pressure over wages and other costs in US call center operations, the sudden pandemic-related jump might have been a one-time thing. The increase happened mostly during 2021, according to Site Selection, and could have been pushed primarily by government stimulus checks.
“There was wage pressure coming out of COVID primarily due to government-subsidized income […] In order to attract employees during that period, employers had no choice but to bump wages to get them to come back in,” explained King White, CEO of Site Selection Group.
Other costs aren’t climbing down as expected either. The trend towards remote working models gave vendors hope for cutting down on real estate and other expenses related to office infrastructure. Nevertheless, work from home (WFH) has proven to be a costly bet that’s creating friction between CX buyers and providers.
To complicate matters, the future of CX real estate remains uncertain. While top companies like Amazon plan to shut down their call center in the US, most industry players are holding onto at least part of their office space in a “wait and see” approach while they sort out their delivery model strategies.
No More Bitter Pills?
Though the landscape is a challenging one at the moment, CX providers in the US might have seen the worst of it already.
Everest expects inflation for onshore CX operations to continue over the next 12-month period. Nevertheless, the firm sees the numbers being considerably less alarming: 3% to 6%.
“Once the cost of living started inflating, the wages were already there and there wasn’t really much room for employers to go up more”—King White, Site Selection Group CEO
Some of the states with the highest numbers of CX jobs will see minimum wage increases in their respective territories next year. California, for example, will push it from US$15.00 an hour to US$15.50 an hour; and Florida finds itself in a gradual transition that aims to put the state-level minimum wage in the US$15.00 an hour level by 2026.
Even then, industry analysts believe that salaries for call center agents have plateaued already, thanks in part to the sudden increase observed in 2021.
“[Inflation] was driven by government stimulus more than cost of living. However, once the cost of living started inflating, the wages were already there and there wasn’t really much room for employers to go up more,” commented White.
Overall inflation in the US climbed down to 7.7% in October, its least alarming number for a 12-month period since the beginning of the year. Though economists remain unsure on whether inflation has peaked in the country, some are hopeful. And with the Fed continuing an aggressive campaign of rate hikes in an attempt to slow down the economy, their hopes are not unfounded.
With that outlook in mind, Site Location Group expects wages in call centers to see moderate increases (2% to 3%).
Inflation is far from the only thing of concern for US-based call center operators at the moment.
After enduring a couple of years of pandemic-related pressures, CX vendors have begun to push for rate hikes. Buyers are reporting price increase solicitations of about 7% on average, leading to discussions on the negotiating table. The market is still figuring out the nuts and bolts of WFH and hybrid delivery models, and buyers wonder about the reasoning behind those price hikes.
There are also concerns over union activity in some pockets of the industry. Agents employed by federal contractor Maximus –which handle calls related to Medicare and the Affordable Care Act– went on strike in early November in Louisiana, Kentucky, Mississippi and Virginia.
The agents –who’ve been receiving union support throughout– are pushing for better working conditions and salaries of US$25 an hour. As a federal contractor, Maximus is forced to pay its employees at least US$15 an hour.
Although the picket lines have yet to appear beyond Maximus’ call centers, union activity in the services sector has seen an unprecedented increase within the US, with Starbucks and Amazon being amongst the most prominent cases.
Though not as stormy as a couple years ago, the overall landscape for call centers in the US is still challenging and –most concerning, perhaps– uncertain.