I’m afraid I couldn’t quite follow the logic of Heidi Shierholz in this New York Times op-ed. It’s not that I don’t understand economics or business or the Bureau of Labor Statstics’s Employment Situation Report. Here’s the meat of what Dr. Shierholz says:
As we sift through the latest jobs report, which showed the economy gained 559,000 jobs in May, three key findings rise to the surface. Bona fide labor shortages are not pervasive. The main problem in the U.S. labor market remains one of labor demand, not labor supply. And unemployment insurance — which many commentators say is keeping workers from returning to work — is bolstering the economy.
After the Great Recession, reports about employers unable to find the workers they needed were pervasive. Everyone from the U.S. Chamber of Commerce to the Obama White House joined in. Growth was slow because workers didn’t have the right skills for the available jobs, the story went.
But they had it completely wrong. At its peak in the Great Recession, the unemployment rate was 10 percent, but it ultimately got down to 3.5 percent — without a hugely expanded national training program to accelerate skills attainment. What actually slowed growth? Insufficient demand for goods and services, which, in turn, meant low demand for workers — not that there weren’t enough qualified workers. It was a labor demand problem, not a labor supply problem.
This is also true today. Wage growth decelerated in May in most sectors. And in a large majority of sectors, wages are growing solidly but not fast enough to raise concern about damaging labor shortages, given that job growth is also strong. Further, we still have 7.6 million fewer jobs than we did before Covid, and there are large employment gaps in virtually all industries and demographic groups. The good news is that unlike in the wake of the Great Recession, today’s labor demand problems are likely to be resolved relatively quickly, thanks to the American Rescue Plan.
While we haven’t seen widespread labor shortages, there is one sector where wage growth points to the possibility of an isolated one: leisure and hospitality. For typical workers in this sector, which includes restaurants, bars, hotels and recreation, the current weekly wage translates into annual earnings of $20,714. With that figure so low, there is little concern recent pay increases will generate broader pressure on wages. In addition, wages in this sector plummeted in the recession and have largely returned to where they’d be if there were no pandemic. And these job reports also take tips into account, which means that wage changes in this sector are most likely driven by the impact of customers returning, en masse, to in-person dining. On top of all this: Rising wages in leisure and hospitality don’t appear to be stymieing job growth, which has been by far the strongest of any sector, contributing three-quarters of the total jobs added in the past two months.
If anything that understates the job losses in the leisure and hospitality sector. At a first approximation that sector shed more jobs than all other sectors combined.
Again, please help me out here. I don’t understand her argument. I’m open to being persuaded but I need to understand how she arrives at her conclusion. I understand the conclusion itself.
You’ve gotten more than me out of it. I don’t know what the conclusion is. Seems to me like she is saying labor shortages are not a concern right now. Whomever fixed the title to the article apparently had a different interpretation: “Republicans, Don’t Ignore the Evidence on ‘Labor Shortages’”
Also, identifying “three key findings” in the latest jobs report without listing them violates Checkov’s Gun, and makes me feel like this is an excerpt from a longer analysis.
I think one of the complications of the leisure sector is that drive-through fast food did very, very well this last year. I’ve seen the lines, which are unprecedented in length and time of day. And I assume that without dine-in options and with orderings apps from national chains, workers in this area were more productive. These restaurants had fewer competitors and less maintenance costs. Seems like you can pay these workers more because business is good.
Meanwhile a similar fast-food place in a business district or airport might have simply shuttered. The more expensive the restaurant, the more difficult it probably was to stay open. Some meals don’t transition to styrofoam.
Some locally owned (non-franchise) restaurant owners apparently were willing to operate at a loss for while to keep their workers. Apparently, it was believed that 50% indoor capacity was about what was needed to meet margins, so when 25% indoor capacity was allowed, they opened anyway. I don’t know how widespread that was or how well this was received by the employees, but when people say that raising wages is the answer, there is probably a group of employers who feel like they already paid with the hope of getting back to what they consider normal.