When the Going Gets Weird

The editors of the Wall Street Journal react to the recent BLS Labor Situation Report:

Employers are crying for workers but they can’t find them even when they pay more. According to the National Federation of Independent Business, 67% of small businesses reported hiring or trying to hire in September, and 42% raised compensation. But a record 51% still have openings they couldn’t fill.

So what’s causing the worker shortage? One possible culprit is government and employer vaccine mandates that set ultimatums for workers. President Biden’s vaccine order first applied to nursing homes, which lost jobs in the month. Many states and school districts have also imposed mandates, and state and local education employment fell 161,000. The White House claims its vaccine mandates will boost job growth, but not if unvaccinated workers quit.

Democrats have also made quitting an easier economic option. Pandemic enhanced unemployment benefits ended in early September, but that was only one week before Labor’s monthly jobless survey ended. Next month might provide better data on that score. But there are still many other federal financial payments that don’t require work, including a $300 monthly allowance per child, food stamps and rental assistance. Many people have saved some of their transfer payments, and now Democrats are promising more.

Inflation may also be tilting the scale to leisure instead of work. Average hourly earnings are rising fast—up 4.6% from a year ago and 7.4% at an annualized rate. But wage growth after inflation has been declining for many lower-income Americans, who spend more of their incomes on food and energy.

In a somewhat similar vein in her recent Washington Post column Megan McArdle observes:

There’s no one reason those jobs are going unfilled. Some of it may just be residual friction from the displacement of the pandemic: workers who moved and have to arrange to move back; parents who are having trouble arranging reliable child care. Some can be chalked up to ongoing difficulties with covid-19, as the immunocompromised or other at-risk groups resist working in person while the virus still circulates. And some of it undoubtedly represents people who are burned out in jobs that suddenly became much more demanding during the pandemic — as well as those who were ready to leave their jobs even before last year but decided not to take the plunge mid-plague.

But much of it seems to reflect the phenomenon that Anthony Klotz, an associate professor of management at Texas A&M, dubs the “pandemic epiphanies”: people who decided that the old normal simply wasn’t good enough for them.

This trend seems most pronounced in the hospitality industry, where restaurant and hotel jobs are going begging. But you can see it all over, from workers who say they’re ready to quit rather than get vaccinated or return to the office, to the International Alliance of Theatrical Stage Employees (IATSE), one of Hollywood’s most powerful unions, which just overwhelmingly voted to authorize what would be the first strike in the union’s history. Much of the unrest seems to be driven by the pandemic: “If COVID has taught us something, it’s that we need to pause and rethink how we’re doing a lot of things,” Katie Sponseller, a production coordinator, told Variety.

Here’s another possibility. Maybe the labor force isn’t as large as it used to be. By a lot. Maybe during the lockdowns migrant workers returned home. Better to live where it’s less expensive than remain and not be eligible for benefits or bringing in a paycheck. That’s a risk of having such a large portion of the labor force be migrants from a nearby country. That might partially explain the larger than expected surge at the border as those workers try to return to the U. S. I wonder how you’d go about testing that hypothesis?

One of the things that I think is happening is relying on low productivity workers is coming back to bite us. It takes capital investment to increase productivity after all. As I’ve noted before you can build massive buildings with enormous gangs of workers or you can require a lot fewer workers assisted by machines and the skills to use the machines.