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What is contributing to the labor shortage?
One can scarcely walk into a restaurant or retail store without seeing large “help wanted” signs. While business complaints about a “labor shortage” are a perennial phenomenon, it seems this time something is different. The question is, just what is causing this mismatch between workers and jobs? Is it generous unemployment insurance, poor business practices or something else altogether?
From the high point in January through the end of May of this year, some 286,000 Hoosiers left the rolls of unemployment insurance. From January to May, Indiana businesses created only 400 new jobs. While we should be open to the hypothesis that generous UI might suppress labor supply, these data make convincingly clear that something else is happening.
The COVID downturn affected mostly low-wage workers, many of whom might have discovered that child care costs and payroll taxes consume so much of a paycheck that their old job just wasn’t worth having. Many are focusing on finding better jobs or working in the growing online “gig” economy. For many displaced workers, a few flexible hours of data entry or home call-center work after the kids go to bed is better than a retail or a fast-food shift.
There are other reasons displaced workers might not return to old jobs. Some will be easing into early retirement, while some will want to remain home until kids head back to school. Some will search for better opportunities in different occupations. We really won’t know until October job numbers are revealed if this is nothing more than a pandemic hangover or a more permanent change.
It is also a mistake to suppose that the only problem lies with workers. Employers, their HR staff and third-party job sites like Indeed or ZipRecruiter might also contribute to the mismatch between workers and jobs. The clearest example of this comes from my daily interactions with college kids.
I know two rising juniors at prestigious colleges. Both have significant leadership and work experience and are willing to work any shift. Both applied to 10 or more jobs on online sites without any response. These were all entry-level, $9.50- to $14-an-hour positions. Finally, both visited a store manager and were hired on the spot. Still, it took more than two weeks to process a drug and background test.
This is a familiar story among college and high school kids looking for work this summer. I don’t know if the problem is bad candidate filtering from the third-party job sites, incomplete applications or overwhelmed HR offices. None of these is a labor shortage.
In the end, there’s one way to know for sure whether we are in the midst of a labor shortage, and that is through wage growth. Without substantial wage growth, we simply cannot have a labor shortage.
Last month, monthly wages rose at an annualized rate of 0.5% and actually fell in several industries. Today, actual evidence of a labor shortage in Indiana just doesn’t exist.•
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“Last month, monthly wages rose at an annualized rate of 0.5% and actually fell in several industries. Today, actual evidence of a labor shortage in Indiana just doesn’t exist.•”
I would suggest you talk to actual employers. Entry level wage growth has been over 15% in the last few months for non-skilled entry level workers. That is consistent across manufacturing and logistics in Indiana. In addition, finding enough individuals in this group to staff a second shift is impossible.
We have no problem hiring degreed or semi-skilled workers.
Perhaps you should read what Prof. Hicks wrote again. The child care issue is particularly acute for second and third shifts.
I would suggest you talk to actual employers. Entry level wage growth has been over 15% in the last few months for non-skilled entry level workers. That is consistent across manufacturing and logistics in Indiana. In addition, finding enough individuals in this group to staff a second shift is impossible.
We have no problem hiring degreed or semi-skilled workers.
“Today, actual evidence of a labor shortage in Indiana just doesn’t exist.” … WOW! Professor Hicks may need to venture out of the ivory tower and look around the real world to understand current reality. Employ anecdotal evidence rather than statistics that often have errors and can be manipulated to mislead. “Anecdotal evidence is a factual claim relying only on personal observation, collected in a casual or non-systematic manner.” Professor Hicks leads off his article with “One can scarcely walk into a restaurant or retail store without seeing large “help wanted” signs.” Then he spirals into hypothesis about why low-wage workers are not returning to the workforce. According to Professor Hicks, the underlying factors are child care costs and payroll taxes consuming too much of their low wages. Of course we could provide subsidized child care, but then we would need to raise payroll taxes to do so. The track record of government taxing and spending is very bad. During the pandemic, they gifted a large percentage of the population substantial checks, “free money” there was no tax revenue to fund, but they issued the checks anyway, and to add insult to injury, many of those checks were gifted to those that did not need the support. This is simply government corruption and waste. Corruption because it amounts to “buying votes” and waste because much of the money was unnecessary to spend. We are at a tipping point in America. We will either look to government to pick the winners and losers through special-interest shaped, convoluted tax policy as they regulate ever-increasing aspects of business and personal decisions, or we will return to a free-market approach that allows businesses and citizens granted freedom by our constitution to make decisions about what is in their best economic interests. Professor Hicks may need to do some “micro-economic research” to determine how so many former, low-wage earners, who are not returning to the workforce, are eating every day, keeping a roof over their heads, and living on a day-to-day basis. What he will discover is that someone else is providing for them, likely through a myriad of programs and in ways that are not obvious. Most Americans are decent people that are more than willing to help those that are in genuine need of assistance. Statistics of what America contributes to private charities bears this out, and there is a significant amount of giving that is never accounted for that is absent from the statistical data. However, those that are and capable to work should work, even at low-wage jobs, if for no other reason, to stay in the workforce where they have access to better jobs when the prove trustworthy, reliable, and capable of performing at a higher level. They also contribute more to their lifetime social security savings account when they are working. Bottom line is that their lives have greater value and meaning if they do something, anything that someone will pay them to do, rather than letting others provide for them. Professor Hicks should spend less time making excuses for why people don’t or should not work, and more time encouraging them to get back in the workforce and work hard to get more and do better. It is also noteworthy that the college students cited in the article had no success online, but had instant success in person. Perhaps the “gig” economy is not everything it is cracked up to be.
“ Bottom line is that their lives have greater value and meaning if they do something, anything that someone will pay them to do, rather than letting others provide for them.”
Do you have anything to back this up? Because the … anecdotal evidence is that people have had it with garbage jobs where they are treated like dirt and are working their way up the food chain.
Low Pay, No Benefits, Rude Customers: Restaurant Workers Quit At Record Rate
https://knpr.org/npr/2021-07/low-pay-no-benefits-rude-customers-restaurant-workers-quit-record-rate
No one should be surprised at what is happening. We’ve made it clear to the folks that used to come across the border to take these jobs no one wants to do that they’re not welcome. Seeing the jobs be unfilled should surprise no one.
So with illegal immigrants out of the picture, the solution is not to berate people to take garbage jobs and insist they will find more meaning in their lives working in a Tyson chicken plant. It’s to pay them more or give them better working conditions. That’s how the actual free market works.
And stop with the “government vs free market” garbage. The government has a role in the free market. You’re asking for a return to the era in which business had all the power and workers were disposable, the pre-union era. Gain some historical perspective.
Also, this from last year (couldn’t find a 2021 variant)
Percentage of Americans Donating to Charity at New Low
https://news.gallup.com/poll/310880/percentage-americans-donating-charity-new-low.aspx
I know, I know. Don’t trust the statistics.
Hicks loses a lot of cred with this column. He needs to talk with employers as well as those in government that deal with those seeking assistance. As long as the Feds keeping putting money out there for those that are not seeking to work as well as rent postponement some have no desire to work. Take that away then you have a rush at the Township level and to non profits looking for help. There is a direct correlation.