The Non-Existent Labor Shortage
Help Wanted signs are popping up like mushrooms after a spring rain. Everyone seems to be hiring at once, and many businesses are complaining about a worker shortage. Some have even had to close because they can’t find enough workers. Unemployment remains stubbornly high compared to pre-covid and even ticked up a bit in April. Is this apparent labor shortage real and if so, what’s causing it?
First, let’s address the elephant in the room, and for the moment I’m not talking about covid. There is a widespread assumption that extended unemployment benefits are driving a labor shortage. The thinking seems to be that workers are lazy and would rather sit at home and collect government benefits rather than work. This is false. No credible study has ever found that expanded benefits prevent people from working.
Before we go any further, let’s take a step back and look at the employment market pre covid. The Bureau of Labor Statistics found that the unemployment rate in March of 2020 was 4.4%. This is close to full employment, which various economists define as anywhere from 4–6.4%. When an economy hits this figure, it means that virtually all of the people who want jobs have them. The unemployed are people new to the labor market, those who are looking for better work, and small number of people whose previous employment was eliminated. At the same time, the number of job openings in February 2020 (before the lockdowns began to take effect) was 6.9 million. These two numbers together indicate that we were on the verge of a genuine labor shortage before the pandemic.
Twenty-two million jobs were lost due to covid. Last month, the unemployment rate was 6.1 percent, and 9.1 million people were drawing unemployment benefits. This doesn’t count the 6.6 million people who have dropped out of the labor force altogether. How many job openings were there in March? 8.1 million. This means that, even if every person on unemployment were to take one of those job openings, we would still have one million people drawing unemployment benefits and more than six million more out of the labor force due to other reasons.
We don’t have a labor shortage. We have a jobs shortage.
Now About Those Help Wanted Signs…
So, what’s behind all those “Help Wanted” signs if it’s not a labor shortage or lazy bums preferring to sit on their butts and collect unemployment rather than work? There’s a whole host of reasons behind them and I’m going to address them one by one.
Concentrated Openings
A job is a job if you don’t have one, right? Not so. Not everyone can do every job. A person’s skills, abilities, physical capabilities, schedule, etc., have to line up with the job for it to be a good fit. That’s why the rules for collecting unemployment specify you can stay on until you find suitable employment.
The jobs available right now are concentrated in only a handful of industries -primarily restaurants, tourism, and hospitality businesses. These are industries that had a hard time getting and keeping employees before the pandemic. They’re marked by low wages, toxic work environments, and unpredictable schedules. None of that has changed. Add in a still raging pandemic and the high possibility of infection that comes with these jobs, and it’s no wonder they’re having a hard time filling vacancies. Furthermore, these businesses are all attempting to ramp up hiring at once, which puts them all in competition for the same small pool of workers. Some former restaurant employees have left the sector altogether. They have found other work, returned to school, or are too afraid of contracting covid themselves or giving it to their family members to return. This makes the potential pool of restaurant workers even smaller.
This is an employee’s market in these fields; for the first time in living memory, workers in these industries have the power to pick and choose which employers they want to work for. Many are saying no thanks to the worst companies. Businesses in these sectors with good reputations for decent pay, treating their employees well, and being good places to work aren’t having a hard time finding employees.
Retirements
One of my next-door neighbors is in his 80s. He long ago retired from a good full-time job and has a good pension. Before covid, he worked a part-time job three days a week at a local retail store to give him something to do and make a bit of extra cash. He hasn’t worked since March of 2020. He has no intention of going back to work.
Nor is he alone; many people at or near retirement ages, from Boomers to those of my neighbors’ generation, calculated their odds of getting covid and what would happen if they did, and chose to retire. These people simply left the labor force and will not be coming back. They often took the jobs with lower pay, few hours, and no set schedules in retail establishments such as grocery stores. Replacing them with younger workers who need more pay and have more demands on their time isn’t easy.
Childcare
Parents must have access to reliable, affordable childcare to be able to work. This is non-negotiable, particularly in industries where workers have to be onsite, such as restaurants and retail stores. Many schools are still either remote or open only part-time. Childcare centers have closed at astounding rates during the pandemic. Even where the latter is available, it may cost several hundred dollars per week. Private babysitters are even more expensive; they start at $15 per hour in my city, and many make much more. Paying someone $15 an hour to go to a job that pays $12 an hour is obviously a poor economic investment. These parents have made the rational choice to stay home until they can once again access childcare. This isn’t laziness; it’s a smart decision.
Lack of childcare has caused 3 million women to drop out of the labor force since March of last year. The situation is so bad that women gained zero net new jobs in the United States in April -in total, every new job in the country went to a man. This won’t change until schools and daycare centers are fully open again. You want people to go back to work? Subsidize childcare and get schools safely open.
It’s the Virus
Ultimately, everything comes back to covid. The virus is still out there, still making people sick and killing them. Over 580,000 Americans are dead. Many of them were in the labor force. They obviously aren’t going back to work. Millions more covid “long-haulers” aren’t able to work. When, and even if, they will be able to return to the workforce isn’t known.
No one else wants to join them, nor do they want to bring covid home to family members who are high risk. Almost all the businesses that are having a hard time finding employees are in high-risk industries. Workers are afraid to come back. Understandably so. Risking death for $12 an hour at a fast-food joint isn’t an attractive idea. The virus must be gotten under control before more people will be willing to re-enter the workforce.
The “labor shortage” is a complex, nuanced issue. It’s easy to blame it on unemployment and score some cheap political points, but that’s not going to resolve the issue. In the end, the only way to fix this problem is to get covid under control so the economy can recover. Even then, some industries may be changed forever. Many workers may simply refuse to return to the restaurant industry, for example, and this may lead to a reduction in the number of restaurants in this country. That won’t necessarily be a bad thing if the result is more companies that treat their workers well and pay them fairly.
Sources and more reading
https://www.oecd.org/social/labour/2086120.pdf
https://www.bls.gov/news.release/archives/jolts_04072020.htm
https://www.bls.gov/news.release/jolts.nr0.htm
https://www.marketplace.org/2021/05/12/retirements-increased-during-the-pandemic-reversing-a-trend/
https://bfi.uchicago.edu/wp-content/uploads/2021/02/BFI_WP_2021-19.pdf
https://www.cbsnews.com/news/covid-crisis-3-million-women-labor-force/
https://www.health.harvard.edu/blog/the-tragedy-of-the-post-covid-long-haulers-2020101521173
https://health.ucdavis.edu/coronavirus/covid-19-information/covid-19-long-haulers.html
