Yesterday, upon the stair,
I met a man who wasn’t there!
He wasn’t there again today,
Oh how I wish he’d go away!
Rather than citing someone else’s opinion let’s just brainstorm the puzzling decline in the labor force. As I’ve said before I think it’s multi-factorial. Let’s spitball a few of the factors:
- Early retirement
- People nervous about going back to work while COVID-19 is still about
- People who returned home to other countries and haven’t been able to get back
- It’s an artifact
- People who feel able to avoid work due to federal, state, or local subsidies
- People for whom it doesn’t make economic sense to work
- Skills mismatch
I think that all of those are factors to one degree or another and I can’t even start to provide quantitative estimates on how important they are. A million here and a million there and pretty soon you’re up to 7 million people. I wanted to comment on a couple of those.
People who returned home to other countries and haven’t been able to get back
I think there are quite a few legal and illegal migrant workers who left the United States in 2020 and are unable to return for one reason or another. I know at least two guys who went home to India early in 2020 for visa reasons and got stuck there.
It’s an artifact
Something rarely mentioned is that the “shortfall” is relative to a number which is itself questionable. Let’s say you’re working a minimum (or sub-minimum) wage job. You’re counted as one worker. Let’s say you take another minimum or sub-minimum wage job. Now you’re counted as two workers. If one of those jobs never comes back, you’re only counted as one worker. If a half million people fit that scenario that could account for quite a few of those missing workers.
Skills mismatch
A lot of the jobs that have just gone away were minimum or sub-minimum wage jobs that didn’t require fancy skills. If the number of jobs that require highly desireable skills has increased while the number of jobs that don’t has decreased, that would manifest as shortfall in the labor force.
What other factors are contributing to the gap?
Workers have been added to the ecommerce sector, and it should be possible to determine that number.
For low wage jobs, the problem of hours is amplified by the overall reduced business hours. So, three stores have three jobs, but those nine jobs are filled by three people. If the hours for each job is cut in half, those three workers need six jobs, and the reduced hours mean the shift conflicts are increased.
Actually, it is a lot worse. Other factors are distance between jobs and transportation options. Some places have dress requirements. They may supply a few shirts, but you may need a specific color pants.
Some people refuse to believe it, but the government dole may be the only realistic option.
Possibly covered by #6, but people who became caregivers of young or old relatives. What does Covid have to do with that? Possibly nothing. Or possibly the Democrats are right about the catastrophic American daycare shortage. Although I’ve said before the solution is not subsidized daycare but better pay for fathers.
Could be demographics, what to do when you and your 2 young children live with grandma in her house and she can no longer be left alone.
You stay home too and milk the system just to keep the lights on.
I thought that raising the minimum wage to $15 would cause automation. So, the easiest solution would be to raise the minimum wage to $15 or higher, and the worker shortage will be solved with the mythical automation.
Before evaluating the spitballs I think its important to
1) acknowledge that prior to the covid situation this was not an outsized topic. It might be wise to ask what explanations would be sensible as a result of a covid world.
2) almost by definition issues like this are difficult to assess as if this was a controlled laboratory experiment. The much hated anecdotal issue arises. But we have 7 companies in portfolio which cover the following industries: a) new residential construction, 2) electronic components for commercial and mil aerospace, c) home renovation, d) commercial HVAC install and service, e) hydraulic components for general industrial and mining applications, f) commercial baked goods, g) premium consumer packaging. That’s a fairly big swath of labor market exposure.
1. Early retirement should have been an issue for awhile. Perhaps only because the over 60 set is more vulnerable to covid should that apply. I couldn’t deny it or prove it so.
2. Covid fear. Same thing. But it sounds like a convenient excuse. There are an awful lot of jobs typically held by younger people who really don’t have more to fear than any number of other things. We are routinely told that covid is an excuse, especially in light of government payment available. It makes it a self inflicted wound.
3. Stuck foreigners – I couldn’t say. I’m sure they exist. But I suspect they are few.
4. Artifact. I’m sure that scenario exists. Its a SWAG as to how many. another self inflicted wound.
5. Subsidies. It simply has been our real life experience that workers are quite willing to admit this, especially knowing that the market for labor is out there.
6. Bad trade off. This should be the case covid or not. Why would it change now?
7. Skills mismatch. Again, a longstanding issue. Why now.
I’ll add one, although it may be a knock on from other factors. With the supply chain problems many downstream jobs may have disappeared.
I’m sure its multifactorial, and as Tasty points out subsidy may indeed be the last refuge for some, although that’s always the case. My intuition is that its dominated by the availability of government transfer payments + cash, non-taxpaying black market work, + leisure vs working. Its pretty tempting for many. I’m not too sympathetic to the notion of crappy jobs. I was a (twice) degreed engineer and had a pretty brutal work environment. We’ve lost something in America as we coddle the participation trophy for everyone crowd.
When the government works with you, people are more optimistic, feel more in charge of their own lives, finding it easier to participate in an economy where they can create a future for themselves. When a government works against them, passion to work, thrive, advance themselves seems futile. That’s where we are today.
I think that’s right, Jan. That’s why authoritarian regimes crush the populace.
Drew, I ran across this little ditty, via a girlfriend’s text. It makes a lot of sense, especially in the midst of the type of culturally suppressive environment being actively cultivated by the Biden regime.
“The difference between tyranny and democracy, is very simple. When the Government knows everything about you that is tyranny. When you know everything about your government that is democracy.â€
That sounds good on the surface but a closer consideration reveals some problems. You don’t know EVERYTHING that’s going on in your own house let alone in the federal government.
However, at this point the federal government and most state governments are so large that NOBODY knows what’s going on in them. We are now a country of 330 million—almost 100 times the size in 1790.
After reflection Drew may be right about those working off the cuff,
side gigs they call that now.
But why?
When I entered the workforce, why did I do it and what did I want?
I remember very clearly why. My parents were strict, and surprisingly vigorous. They would have none of my living in their basement.
It was a root cellar anyway.
There were things I wanted to do and have that I could not if I didn’t earn money, (and find my own accommodations).
That was enough incentive for a while, but then after a time my girlfriend got in a family way, and incentives changed.
I found that the Teamsters trucking job I had actually gave me health insurance which paid the $20,000 tab for the birth of my son, who knew?
Later on, I gradually became aware of the pension benefits paid and accrued under my name, again, who knew?
As I grew older, I gradually became aware of the assault on what in days past were referred to as “benefits”.
More and more companies offering benefits bankrupted in the face of competition from those who did not.
The benefit decline wad steady until what? 2010, 11? And then.
Obamacare hit the working class like brick through the windshield.
Employers MUST offer healthcare insurance to full-time employees.
Full time jobs vanished.
Benefits vanished. The reason employees stayed with one employer for 30-40 years was gone.
In return, we were offered the transportable freedom of the 401K.
Taxes deferred.
Until we reach a retirement age most of us never will.
Working for wage, selling a man’s time to another man, is now a temporary arrangement.
Why tell the government and give them a cut?
5 other factors
1). Demographics — 60 years ago from today is 1961. 20 years ago from today is 2001. The peak of the baby boom is retiring while the post millennial baby bust is entering the work force.
2). Employers and labor believe the labor shortage is transitory. A variation of Milton Friedman’s “permanent income hypothesisâ€; employers won’t spend resources to lure workers to go into X industry (and workers won’t take the risk of investing into training for an X industry) unless they are confident this is not a temporary blip. As an example; coal demand is up 30% compared to pre-pandemic but I doubt anyone would be willing to be a coal worker unless they were confident the gig can last 20 years.
3). Vaccine mandates; this was less an issue before the fall but it’s becoming a bigger issue now. For employers reporting it; something like 1-5% are leaving/fired over vaccines. 1-5% may not seem a lot; but given the relative slack of spare workers is only 5-10% in recessions; so it is enough to cause problems
4). Monetary policy. Markets and price signals are useful mechanism to allocate resources. Excessively easy money can weaken those mechanisms and mis allocate resources; including labor. How many people are working on cryptocurrency; which in a sane world, is probably worthless.
5) rent and debt moratoriums – while UI benefits caught a lot of attention; the truth is a lot of people work because they have to pay the rent and payoff debt. Without those; the pressure to take any job decreases. Rent moratoriums is only rolling off at the State level now and college debt moratorium is expiring mid 22.