Help Wanted

"We are trying to hire people, but cannot!"

An anecdotal look at the labor markets in southern Oregon and Beijing, China.  Two snapshots.

Two subjective observations are not the same thing as real data, but still, an observation and measurement is more credible than an opinion voiced at a campaign rally and we have had many of those from all sides.   What is the employment situation?  Are there jobs available?

Southern Oregon.  The answer from people who employ people in my community in southern Oregon is that there is ample work for people willing to work for $10 an hour, but one cannot find them.  A college scholarship recipient told me that she worked in retail at a chain drug store, Rite Aid, paid just over minimum wage and getting 25 hours a week, but never more.   "They keep my hours below thirty," she said.  She said there are lots of jobs available, but only up to 25 hours a week.  She has other part time jobs to fill out her work day, but it is complicated by the fact that her employer keeps shifting her schedule.  She was frustrated with them and is looking for something better, and she said Rite Aid is always looking to find employees.  Rite Aid is an example of a business model that still works, but is being stressed: low wage, high turnover, constant training of new staff.   The 25-hour work week is their attempt to avoid payment of health insurance benefits The net result is that the cost of health care for this person is shifted from the employer to the taxpayer.  The model will work if they can find employees.

This pattern in entry level jobs is widespread.  The result is " help wanted" signs in multiple places: retail, agricultural, hospitality.   A phrase I hear from employers is that young people "don't want to work hard"  but it may actually mask the sentiment that young people do not want to work hard for the wages and situation being offered traditionally by employers in low wage industries.   

There is a labor shortage and there is wage pressure upward because of the marijuana industry is pushing wages upward   Growing marijuana has periods when it just like any other agricultural work: stooping over in the hot sun, digging, carrying, lifting, trudging and some of it needs to be done at exactly the right time.  Employers need to pay up to get people to show up. 

Marijuana margins make it possible--and necessary--to find employees with technical know how and dexterity for jobs like trimming the stems and leaves off marijuana buds so that the resulting product meets the salability requirements of the marketplace.   (Baby boomer readers who remember marijuana as a mix of chopped up stems and leaves have out of date memories.   Today the marketplace requires trimmed buds.)

Automated trimmer $30,000.  Lower quality than hand work.

Marijuana trimming work has skewed the labor market because good, experienced trimmers want 20-25% of the weight of what they trim, which works out to $50-$100 per hour.  The work is seasonal but the result is that these workers have middle class incomes, and a much higher wage expectation.  Working for $12/hour doing agricultural work in the hot summer sun does not have appeal who find other seasonal work paying four to eight times that.  Many people have mentally re-set their work value.  They have become comfortable with middle class incomes derived from marijuana trimming work and they live middle class economic lives.  They pay market rents for their housing; they buy cars; they buy clothing.  Some employers consider this an inconvenience and generally bad for them and the labor markets but it is having two effects: scarcity of labor for traditional entry level work and more money circulating in the economy, which from a community and Chamber of Commerce point of view is a good thing.

Meanwhile, international labor and housing markets.  I spoke at some length with a web designer currently working for an on-line academic publishing company.  Her company requires English speaking editors with college degrees or higher to coordinate with academic writers world wide.  The company publishes academic research papers via their on-line service.  (Career advancement in academia requires respected peer-reviewed research publication and this is one of several services that expose research papers to the marketplace of ideas.  It is invisible to people outside academia, but it is a big, viable industry.)   

The organization has traditionally had key employees in Switzerland and the United States, with big satellite facilities in low-wage Chinese cities.  China has adequate numbers of highly educated English speakers, capable of communicating in a sophisticated way--generally by email-- especially in its big cities like Beijing, and traditionally wages were low by international standards.  It was a high-end version of the call-center work that takes place in low wage countries.

Far, far less affordable than Portland, Oregon

The company needed to shut down the Beijing service center.  Employees there required too high a wage.  They could not survive in Beijing.

I show here the housing affordability of Beijing compared to Portland, Oregon, a city that now considers itself in a housing crisis due to the high cost of housing.  Beijing is not simply worse, it is much, much worse, on an entirely different scale, with Portland being nine times more affordable than Beijing.   Washington, DC prices are higher but incomes are also higher, but again, the traditional American notion that the US was a high cost location and that China had a low wage/low cost comparative advantage is out of date and badly mistaken.

The publishing company is reducing Beijing as a service center and instead expanding in Barcelona, Spain, a top tier international city.  

What was going on?  Housing prices in Beijing have risen so high that employees paid their previous wage of 6,000 yuen a month (approximately 800 US dollars) were spending some 4,000 yuen/month of their wages for housing alone.  

The 2016 campaign is remembered now partly as Trump saying that he would bring jobs back to America, a message that resonated everywhere but especially in the upper midwest where Trump carried states that he was not expected to win.  Meanwhile, Hillary Clinton's campaign is remembered partly as her failure to address jobs in a persuasive way, thinking she forgot her husband's guidance: "it's the economy, stupid."   Labor is location-specific.  People don't move easily and cheaply.  There is a mis-match between labor supply, demand, and housing costs.  

Each participant in southern Oregon labor market has reason to be frustrated:  the employer who wants to hire reliable people for $10/hour, the employee who wants 40 hours a week and benefits, the taxpayer who resents having costs shifted to himself by employers hiring for fewer than 30 hours, the agricultural employer who cannot find employees at any price, the government which notes that forbidding banking by marijuana growers requires that employees be paid in untaxed cash.  

Meanwhile, certain locations, including especially the San Francisco Bay Area, have such a concentration of IT talent and resources that there is comparative advantage to squeezing into a too-crowded and too-expensive a location in order to access the synergies of the location, thus exacerbating the housing cost problem.  Beijing has a similar attraction as a node of privilege within China, complicated and diminished by the fact that the air is hazardous to breathe.   The government needs to require that the families of high government officials live in Beijing; otherwise they would move their families out of the city.

"Pushing out even the highest earners."

The China situation reflects a housing crisis as much as a labor one.  In first tier cities like Beijing and Shanghai housing prices are comparable to San Francisco.  Second and third tier inland cities like Hufai (a city of 3,000,000 people--the 37th largest city in China) housing prices are lower: $300/square foot, or about 300,000 US dollars for a 1,000 sq. foot apartment, a price comparable with many top tier cities in the US, and well above new construction costs in southern Oregon.

Trump did not offer a credible solution to the actual problems, but he did offer a diagnosis (immigrants and cheap Chinese labor competition) and a solution (tighten immigration and better trade deals.)  Any plan is better than no plan, and Trump communicated what Hillary did not, that he understood people's frustrations.   The frustrations were real.

Trump said he would shake things up.  Hillary did not.