The myth of labor shortages

[Stevicus]

The Myth of Labor Shortages

I thought this was an interesting article which raised some rather cogent points about the alleged "labor shortage" some people are talking about.

The chief executive of Domino’s Pizza has complained that the company can’t hire enough drivers. Lyft and Uber claim to have a similar problem. A McDonald’s franchise in Florida offered $50 to anybody willing to show up for an interview. And some fast-food outlets have hung signs in their windows saying, “No one wants to work anymore.”

The idea that the United States suffers from a labor shortage is fast becoming conventional wisdom. But before you accept the idea, it’s worth taking a few minutes to think it through.

Once you do, you may realize that the labor shortage is more myth than reality.

Econ 101
Let’s start with some basic economics. The U.S. is a capitalist country, and one of the beauties of capitalism is its mechanism for dealing with shortages. In a communist system, people must wait in long lines when there is more demand than supply for an item. That’s an actual shortage. In a capitalist economy, however, there is a ready solution.

The company or person providing the item raises its price. Doing so causes other providers to see an opportunity for profit and enter the market, increasing supply. To take a hypothetical example, a shortage of baguettes in a town will lead to higher prices, which will in turn cause more local bakeries to begin making their own baguettes (and also cause some families to choose other forms of starch). Suddenly, the baguette shortage is no more.

Human labor is not the same thing as a baguette, but the fundamental idea is similar: In a market economy, both labor and baguettes are products with fluctuating prices.

When a company is struggling to find enough labor, it can solve the problem by offering to pay a higher price for that labor — also known as higher wages. More workers will then enter the labor market. Suddenly, the labor shortage will be no more.

Well, there's a novel concept: If there's a shortage of workers, offer higher wages. I wonder why no one ever thought of that before.

One of the few ways to have a true labor shortage in a capitalist economy is for workers to be demanding wages so high that businesses cannot stay afloat while paying those wages. But there is a lot of evidence to suggest that the U.S. economy does not suffer from that problem.

If anything, wages today are historically low. They have been growing slowly for decades for every income group other than the affluent. As a share of gross domestic product, worker compensation is lower than at any point in the second half of the 20th century. Two main causes are corporate consolidation and shrinking labor unions, which together have given employers more workplace power and employees less of it.

This is another interesting point: U.S. wages are at a historic low compared to any point in the second half of the 20th century. This is attributed to corporate consolidation and shrinking labor unions.

Company profits have also risen sharply during the same period, making up a larger share of GDP than in previous decades. So, they can well afford to increase wages and still make a profit. The fact that they're still resistant to do this is very telling.

Just as telling as the wage data, the share of working-age Americans who are in fact working has declined in recent decades. The country now has the equivalent of a large group of bakeries that are not making baguettes but would do so if it were more lucrative — a pool of would-be workers, sitting on the sidelines of the labor market.

Corporate profits, on the other hand, have been rising rapidly and now make up a larger share of G.D.P. than in previous decades. As a result, most companies can afford to respond to a growing economy by raising wages and continuing to make profits, albeit perhaps not the unusually generous profits they have been enjoying.

Sure enough, some companies have responded to the alleged labor shortage by doing exactly this. Bank of America announced Tuesday that it would raise its minimum hourly wage to $25 and insist that contractors pay at least $15 an hour. Other companies that have recently announced pay increases include Amazon, Chipotle, Costco, McDonald’s, Walmart, J.P. Morgan Chase and Sheetz convenience stores.

Low wages seem normal
Why the continuing complaints about a labor shortage, then?

They are not totally misguided. For one thing, some Americans appear to have temporarily dropped out of the labor force because of Covid-19. Some high-skill industries may also be suffering from a true lack of qualified workers, and some small businesses may not be able to absorb higher wages. Finally, there is a rollicking partisan debate about whether expanded jobless benefits during the pandemic have caused workers to opt out.

For now, some combination of these forces — together with a rebounding economy — has created the impression of labor shortages. But companies have an easy way to solve the problem: Pay more.

That so many are complaining about the situation is not a sign that something is wrong with the American economy. It is a sign that corporate executives have grown so accustomed to a low-wage economy that many believe anything else is unnatural.

It's just another case of capitalist entitlement: "We deserve more because we're worth it," while viewing the workers as "not worth it." Even though they're complaining about labor shortages and apparently desperate for workers, the most obvious solution seems to elude them.

 

[SalixIncendium]

Companies are paying more. Ohio minimum wage is $8.70. The QSR I left in December was starting employees out at $11-$13 per hour when I left and based on my connections on FB and LinkedIn, even more now. It barely made an impact on the staffing deficit.

Expanded unemployment benefits have had a significant impact on staffing in several industries, not just QSR. People who work in these industries don't have a banner work ethic...nothing like the work ethic of my generation.

It's no "myth."

 

[Twilight Hue]

The Myth of Labor Shortages

I thought this was an interesting article which raised some rather cogent points about the alleged "labor shortage" some people are talking about.







Well, there's a novel concept: If there's a shortage of workers, offer higher wages. I wonder why no one ever thought of that before.



This is another interesting point: U.S. wages are at a historic low compared to any point in the second half of the 20th century. This is attributed to corporate consolidation and shrinking labor unions.

Company profits have also risen sharply during the same period, making up a larger share of GDP than in previous decades. So, they can well afford to increase wages and still make a profit. The fact that they're still resistant to do this is very telling.



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It's just another case of capitalist entitlement: "We deserve more because we're worth it," while viewing the workers as "not worth it." Even though they're complaining about labor shortages and apparently desperate for workers, the most obvious solution seems to elude them.

Simple question...

Then why is it hard to find good paying jobs with good hours?

 

[Twilight Hue]

Companies are paying more. Ohio minimum wage is $8.70. The QSR I left in December was starting employees out at $11-$13 per hour when I left and based on my connections on FB and LinkedIn, even more now. It barely made an impact on the staffing deficit.

Expanded unemployment benefits have had a significant impact on staffing in several industries, not just QSR. People who work in these industries don't have a banner work ethic...nothing like the work ethic of my generation.

It's no "myth."

11 to 13? People cannot live on 11 to 13 hr

 

[SalixIncendium]

Simple question...

Then why is it hard to find good paying jobs with good hours?

With the shift in consumer demand in the service and retail industry, "good hours" is a thing of the past.

 

[SalixIncendium]

11 to 13? People cannot live on 11 to 13 hr

Oh, well then I see how staying home and collecting unemployment makes more sense.

Thanks for setting me straight.

 

[Koldo]

Companies are paying more. Ohio minimum wage is $8.70. The QSR I left in December was starting employees out at $11-$13 per hour when I left and based on my connections on FB and LinkedIn, even more now. It barely made an impact on the staffing deficit.

Expanded unemployment benefits have had a significant impact on staffing in several industries, not just QSR. People who work in these industries don't have a banner work ethic...nothing like the work ethic of my generation.

It's no "myth."

Keep increasing the wages. Those employees will show up, like magic.

 

[amorphous_constellation]

This is another interesting point: U.S. wages are at a historic low compared to any point in the second half of the 20th century.

I think a wage can only be understood, in terms worth, if the costs of life around it are analyzed on the same graph. Then you find the mean value between those, and that's what the wage is really worth. If you make 15 dollars an hour, and everything around you cost pennies, and then later you make 18 an hour, and everything around you cost a hundred dollars, then you are making less at 18 an hour

 

[Twilight Hue]

Oh, well then I see how staying home and collecting unemployment makes more sense.

Thanks for setting me straight.

Dosent negate the fact that a person cannot live off 11 to 13 an hour.

 

[SalixIncendium]

Keep increasing the wages. Those employees will show up, like magic.

What's the "magic" number?

 

[SalixIncendium]

Dosent negate the fact that a person cannot live off 11 to 13 an hour.

It's also irrelevant to the labor shortage.

Unless you think "not working" is an answer to low wages.

Do you think unskilled workers should earn as much as skilled workers? If so, what earns them that right?

 

[Twilight Hue]

Keep increasing the wages. Those employees will show up, like magic.

Quality as well. Nobody wants to be working all hours of the day and night as people have lives of their own outside work.

 

[SalixIncendium]

Quality as well. Nobody wants to be working all hours of the day and night as people have lives ofbtheir own outside work.

Of course not. But consumers continue to patronize establishments at "all hours of the day and night." Maybe if the stop doing so, it wouldn't remain profitable for employers to work employees during these hours.

 

[Stevicus]

Companies are paying more. Ohio minimum wage is $8.70. The QSR I left in December was starting employees out at $11-$13 per hour when I left and based on my connections on FB and LinkedIn, even more now. It barely made an impact on the staffing deficit.

Expanded unemployment benefits have had a significant impact on staffing in several industries, not just QSR. People who work in these industries don't have a banner work ethic...nothing like the work ethic of my generation.

It's no "myth."

I had to look up QSR: QSR - Wikipedia

I'm not unaware of the difficulties in finding workers, as I've seen it in the industry I work in. As a result, a lot of shifts are filled by employees already in overtime, which is an even bigger bite.

I would suggest that, if the expanded unemployment benefits (which really aren't that much when you really come down to it) can cause so many people to stay home and not look for work, then we need to take a long, hard look at the overall economy and try to determine why.

Is it truly a lack of work ethic? Have large portions of America turned into a bunch of lazy ne'er-do-wells? I've seen some of this first-hand, and I've read a lot of anecdotal evidence. But I don't really know how pervasive it actually is, or even if it's generational.

Is it the corporate culture which is a turn-off to some employees? Sometimes, how people are treated, or the practices and rituals associated with the employer-employee relationship - that may affect a person's decision to work for a company. It may be a factor even more significant than pay.

When I sit down with family or friends or others and they complain about their jobs, it's oftentimes not about the actual work. It's usually due to having to conform to the insanity and personality defects of whoever is running the place. Sometimes a toxic culture can develop which can affect morale.

 

[Koldo]

What's the "magic" number?

Varies a lot. Just keep increasing until the employees show up.

 

[9-10ths_Penguin]

What's the "magic" number?

We just posted two jobs for my department; the lower paying one has a salary of around $65,000/year plus benefits (so in the ballpark of $37/h). Those two postings both got more than 100 applicants... most well-qualified, some ridiculously over-qualified.

If $13/h isn't getting the position filled, then I imagine that the "magic" number that gets you enough decent applicants to fill the job easily is somewhere between $13/h (I assume with no or limited benefits) and $37/h (with full benefits).

 

[SalixIncendium]

I had to look up QSR: QSR - Wikipedia

I'm not unaware of the difficulties in finding workers, as I've seen it in the industry I work in. As a result, a lot of shifts are filled by employees already in overtime, which is an even bigger bite.

I would suggest that, if the expanded unemployment benefits (which really aren't that much when you really come down to it) can cause so many people to stay home and not look for work, then we need to take a long, hard look at the overall economy and try to determine why.

Is it truly a lack of work ethic? Have large portions of America turned into a bunch of lazy ne'er-do-wells? I've seen some of this first-hand, and I've read a lot of anecdotal evidence. But I don't really know how pervasive it actually is, or even if it's generational.

Is it the corporate culture which is a turn-off to some employees? Sometimes, how people are treated, or the practices and rituals associated with the employer-employee relationship - that may affect a person's decision to work for a company. It may be a factor even more significant than pay.

When I sit down with family or friends or others and they complain about their jobs, it's oftentimes not about the actual work. It's usually due to having to conform to the insanity and personality defects of whoever is running the place. Sometimes a toxic culture can develop which can affect morale.

In the last 6 months, I've played on both sides of the fence. I have been an employer and an entry level employee, and I've felt the effects at both ends of the candle.

Yes, much if it is, indeed, lack of work ethic. I started in December in an entry level position at entry level pay. I made the effort to get my DOT certification, and in four months, I have earned two pay raises, putting me at a livable wage. People who started before me are still at their entry level pay (at least those who haven't gotten themselves fired or just stopped showing up) because they lack drive to better themselves, have chronic attendance issues, and are mediocre workers. In fact, out of about 40 employees, I'm one of three that have never called off...in the short 5 months since I've started.

And I'm that employee that picks up OT and is tired as a result of picking up the slack for others. Having been at the other end of that candle, I pick up the slack, because I understand the position irresponsible workers (if there are even workers to schedule) impacts the company and the management team.

Employers are willing to pay people more money, and I am evidence of that. But they will only pay those who give them a return on investment.

 

[SalixIncendium]

We just posted two jobs for my department; the lower paying one has a salary of around $65,000/year plus benefits (so in the ballpark of $37/h). Those two postings both got more than 100 applicants... most well-qualified, some ridiculously over-qualified.

If $13/h isn't getting the position filled, then I imagine that the "magic" number that gets you enough decent applicants to fill the job easily is somewhere between $13/h (I assume with no or limited benefits) and $37/h (with full benefits).

I'm going to guess that these positions aren't entry level.

You're comparing apples to oranges.

 

[Brickjectivity]

Companies are paying more. Ohio minimum wage is $8.70. The QSR I left in December was starting employees out at $11-$13 per hour when I left and based on my connections on FB and LinkedIn, even more now. It barely made an impact on the staffing deficit.

Expanded unemployment benefits have had a significant impact on staffing in several industries, not just QSR. People who work in these industries don't have a banner work ethic...nothing like the work ethic of my generation.

It's no "myth."

It is possible for a person of low to average intelligence to work continually for years and have no savings or property at the end, but even a person of greater intelligence may have difficulty determining how to accumulate wealth. Its a skill, and you have to know how to live cheaply. If you don't accumulate anything then work is unrewarding.

Also businesses often strive to justify low or no raise, no retirement, no healthcare. You can see that 11$ per hour is considered generous, yet its barely enough to do anything but survive month to month. What I mean by generous is that its considered pity pay, pay that you don't deserve for what you do though the company appreciates all of its employees. Suppose a person is offered 35 hours a week ---> 385 $ before taxes ---> 20,000 $ per year before taxes, the same as someone working 40 hours for 9.65 $. The number of hours you get greatly influences your pay, but you don't actually deserve that much. Its simply what the company can afford in this market. You're fortunate to be working at all, and you really aren't all that good at your job. It amazing you haven't been fired.

Are employers bad people? Not what I'm saying. I'm saying that I'm not at all surprised that nobody wants to work in this market.

I Make $20K per Year. How Can I Survive?

 

[Stevicus]

I think a wage can only be understood, in terms worth, if the costs of life around it are analyzed on the same graph. Then you find the mean value between those, and that's what the wage is really worth. If you make 15 dollars an hour, and everything around you cost pennies, and then later you make 18 an hour, and everything around you cost a hundred dollars, then you are making less at 18 an hour

The graph indicated that it was adjusted for inflation.