To the editors of the Wall Street Journal’s list of reasons that employers find it hard to find workers:
The biggest labor story this Labor Day is the trouble that employers are having finding workers across the country. Friday’s report of a modest gain of only 156,000 new jobs in August doesn’t change that reality even though the jobless rate rose a tick to 4.4%
There are many reasons for the shortage, including drug use among the young, the disincentive to work due to easier disability, and the skills mismatch between what employers need and what kids learn in poor K-12 public schools. But the shortage will increase if the economy grows faster, so it’s good news that some in Congress have ideas to mitigate labor shortages in fields like construction and technology.
I would add several more. Nearly 10% of mortgages nationwide are still underwater (negative equity), ten years now after the financial crisis. That makes it harder to move for a job than it otherwise might be. The problem is particularly serious in black communities where the percentage of underwater mortgages is 20%.
Another issue is the large number of households making ends meet by two or more of its members working. That’s the case with more than 50% of married couples. That makes it easier to pay the bills but it also means that if you move for work either the job for which you are moving has to pay enough for the other spouse to stop working or you’ve got to find two jobs in the new location.
An additional issue, particularly problematic among blacks, is criminal records. If you’re poor stealing a bottle of wine from a convenience store or getting caught smoking a joint can blight your life.
Yet another issue is the manner in which jobs are advertised and filled. Many companies no longer have inhouse personnel departments that advertise and hire. They rely on temp or placement companies and many placement companies do business mostly or entirely by bringing in workers from abroad. That makes labor shortages look greater than they actually may be. Those are the reasons that I support a national clearing house for jobs.
A much graver issue is that most of the jobs that go unfilled are low wage jobs for which no one would or should move to fill. A great deal of that is by design.
I’ve told this story before but it bears repeating. Some years back I sat in the boardroom of one of the country’s biggest banks while a director explained his bank’s business plan as it related to hiring: rather than automating tasks they organized them to be performed by unskilled workers paid minimum wage. That way they wouldn’t need skilled workers to operate the machine and if the workers complained about wages or conditions or tried to organize they could easily be replaced. Multiple that by thousands or tens of thousands of companies. It’s what the Germans call the “American system”: maximize the number of minimum wage jobs. IMO it’s a widespread business plan and it’s not one that serves the American people well.
The construction and technology jobs to which the editors of the WSJ point are a red herring. The number of construction jobs on offer is actually declining and the percentage that goes unfilled is relatively low. The percentage of job openings in either industry is actually low. That assertion is supported by low wage growth in both the technology and construction industries. If the demand were actually growing sharply, you would expect wages to be rising. Where is the actual increase in jobs? Hospitality and food service.
IMO that’s the best argument in favor of a high national minimum wage. The weakness in the argument is that in the absence of serious workplace enforcement it would be more likely to create a black market in employment than it would be to increase wages.
The graph at the top of the page illustrates something that might surprise you. See that tiny dogleg at the right end of the graph? The working age population of the United States has actually declined a little. Are we entering the same territory as China, Japan, Germany, and most of the other OECD countries? Japan is prospering despite a declining population because GDP continues to increase and its income inequality is low. We need to devote more energy to thinking about what sort of country we want to be. If we continue with the “American model” we’ll continue creating mostly low wage jobs, importing workers to fill them, and treating everyone who isn’t in the top few percent of income earners like dirt.
You’ve done a great job of illustrating the problem of the working class. Now tell me why in the world anyone with power would WANT to screw this peonage system up for themselves. The only power we had going was the unions, and they’ve been successfully demonized so as to actually be unpopular with Americans. Despair is the new normal.
To your list i would add drug testing. Absent a criminal record, companies are still drug testing and a positive test means no job.
Steve
I can’t speak for any industries other than engineering / IT, but there’s no real shortage of useful folks despite what you might hear about the “STEM crisis”.
That said, there seems to be a lack of skills and understanding in the managerial and HR ranks. Smart companies looking for employees will do more than spam job boards and filter applications based on buzzwords. Skilled interviewers will invest time in interviews to identify attitudes and aptitudes. Wise employers will fairly compensate their workers and build trust in other ways.
Alternatively, companies can continue treating their workforce like temporary help they picked up on the corner by the home improvement store, cutting benefits, and tossing people to the curb when convenient to make those quarterly forecasts. Maybe the economy will stay crappy enough that people will take jobs like that.
“The American System,” eh? Nice name that.
You do realize, don’t you, that you’re describing a society which is increasingly thuggish, unloved, resent-driven and lacking in loyalty?
No doubt the lawyers and finance companies and cops will continue to keep the lower classes under control but this isn’t shaping up as an era in which people sing any more about being “Proud to be an American.”
Nice further explanation of the American System.
https://www.nytimes.com/2017/09/03/upshot/to-understand-rising-inequality-consider-the-janitors-at-two-top-companies-then-and-now.html?partner=rss&emc=rss
Steve
Most broadly, and no matter the German label, the American system can be summarized as: promote national self sufficiency of the means supply (through tariffs if necessary), invest in national infrastructure, and central banking to manage credit growth. As such, a fundamental notion is that the domestic means of production, labor and capital, reside within America’s borders. This tenet often finds itself at odds with (British) free trade theory and, I think Dave’s more narrow point, reconciling tensions between labor and capital, although I think the characterization of the goal of maximizing the number of minimum wage jobs is a gross oversimplification, to the point of being flat damned wrong.
I wasn’t at the directors meeting, you were, Dave, so I have to accept your story at face value. But hiring replaceable minimum wage workers who don’t complain etc while foregoing automated tasks, who don’t complain, call in sick, organize etc is simply irrational. Personally, I have never, ever heard of such a “strategy.” Ever. And I’ve interviewed, financed and owned quite a list of companies over the years. Hiring is not a costless exercise. Further, I don’t think creation of minimum wage jobs in the hospitality industry was designed to populate the country with low wage workers. It was the outgrowth of economic realities and government policies.
What I do think the vignette highlights is some tensions that are well worn at this blogsite: cheaper goods for US consumers vs the wage structure for US workers, corporate visa abuses vs politicians’ campaign coffers, deadweight loss associated with growth in the government enterprise, and special interest regulatory and tax policies at odds with US based production. Those are difficult, and less conspiratorial, issues to be grappled with.
From a historical perspective some chaps named Hamilton and Lincoln were American Model advocates. Today, most Democrats, including the last president and candidate for president, were globalists and “free traders.” They are squarely on the opposite side of the Average Joe. Establishment Republicans are for the most part similarly positioned. Oddly, it is President Trump who stands as the current strongest advocate for the American worker with his immigration and trade deal stances. Heh.
Are we all Trumpians now?
I can tell you I was shocked when I heard it, Guarneri. I was there for a client who had developed an innovative product for banks that automated work that was then being done by hand. Actually, my company had designed and developed the product, my client told us what it was the product should do.
The point that was underscored for me is that there are people in positions of power and influence who want serfs rather than employees.
Trump? The guy who just increased the number of H2B visas really cares about the immigration issue? You are too funny. Probably just a coincidence that H2B workers are the ones who would work in hotels. OTOH, Trump will cut taxes on the wealthy. That will help those American workers!
Steve
What a wicked web we weave….
http://www.zerohedge.com/news/2017-09-04/moral-outrage-over-low-wages-canada-joins-trump-threats-leave-nafta
I believe you heard it, Dave. I believe you were shocked. On what basis could I dispute it? I also believe that when it comes to Big Business stupidity, irrationality, venality and empire building are always a possibility. This observation is the genesis of my recent comment about how we sometimes pass like ships in the night. I simply note that in my $50-$300mm revenue company world we just don’t observe this, and we certainly wouldnt/won’t tolerate it. It is also the genesis of my smaller and more limited government worldview. Large organizations can afford to be sucked into the baser aspects of human nature.