Capitalism has a solution to the labor shortage.
Supply and Demand.
Government stopped people from working. They broke it, so they owned it--they paid people not to work.
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| Job Posting: Harry and David |
That raised the wage floor.
America had a public health crisis. A great many people who wanted to work were told they could not. Both Republicans and Democrats agreed to enhanced unemployment benefits and income supplements. After all, it was the government telling people not to work.
The underlying premise of the American labor market had been that hard working taxpayers should not have to support laziness. Unemployment insurance gave temporary income support of less than what people would earn if working.
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| Medford Parks: Riding Lawn Mower |
COVID rules reversed the practice and moral premise. It was virtuous to stay home. Between state and federal unemployment checks and other direct payments, people in low and moderate paying jobs could get by without working. A critical mass of people dropped out of the labor market.
This took place at a time of heighten consciousness of income disparities, voiced by leftist "progressives" like Sanders, and right-populism from Trump. Ten years ago GOP politicians spoke of the virtue of "trickle down" and the virtue of wealthy job-creating "makers" over "takers." Not anymore.
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| Medford cable operator: will train |
The American economy has been slowly skewing toward owning rather than working. George W. Bush gave it a name--the "ownership society." The idea was that people would succeed financially by owning things--their own small business and their own home--and that workers get an increasing part of their income by owning a bit of the stock market in their retirement accounts. People would be both labor and capital.
Wealth wasn't trickling down because employees did not make enough money to become owners. The benefits of ownership went to the richest Americans. They are the "takers" now. This idea has become commonplace thinking among both Democrats and Republicans.
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| St. Louis Fed: Share of national income going to wages and salaries |
That resets the labor market and political environment for America as we come out of the COVID era. Employers want to go back to pre-COVID normal, and they cannot. They don't have the workers they need. Traditionally, minimum wage jobs allowed people to survive on a mix of wages and public benefits. Extra unemployment benefits during COVID give some employees another option: Stay home.
America is in the midst of an experiment. Can businesses raise the incomes of lower-paid employees enough to entice people back to work, and if so, will the market adjust to keep those higher wages permanent? As consumers, taxpayers, and voters, Americans may decide we would rather pay higher costs for certain items generally provided by low-wage personnel--elderly care, hospitality, agricultural products, delivery--than pay in taxes for public subsidy of health, food, and housing that allow minimum wage workers to survive.
Americans would not normally do this by intention. Conventional political thinking locks Republicans into opposition to minimum wage laws, thereby protecting the subsidy given their business constituency by essentially topping-up the wages they pay with public benefits. Democratic policy normally points toward government programs to alleviate injury points. Republicans fight these as "giveaways." That is the push and pull of current politics.
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Southern Oregon provides a pilot program test. We are a long way from metropolitan areas and are an archetypal low-wage area. We experience our own worker shortage thanks to the local cannabis economy. People who might have looked for jobs at Walmart or fast food employers or agricultural work at or near minimum wage have another option--growing or trimming cannabis. That work pays $15/hour, minimum and often much more, with add-on bonuses "at the back end" when crops were sold. Growers can not use banks, so they pay employees in cash. This raises the wage floor.
The net result was not disaster. Instead, more people have more money to spend. Workers can afford to pay for cars and car insurance, pay off student loans, pay their landlords, buy stuff. Businesses made adjustments in how things are produced and what things cost the consumer. The costs of producing things (including having workers who can eat, sleep, wash, have children, stay healthy, live) transfers to the consumer.
Democrats benefit when people are paid more. The erosion of Blacks and Hispanics votes in 2020 surprised Democrats, but should not have. Apparently many in those groups would rather be treated as "regular Americans" like everyone else, earning their way, than as special beneficiaries of Democratic programs. Republicans will benefit. They think government programs are bribes to voters. Better a paycheck than a food stamp card.
COVID benefits created a temporary labor shortage and thereby a wage floor. Americans are aware that the American economy has been skewed against workers. America has had meaningful wage floors in the past, including during the 1950s period that Trump suggests to be the "Great Again" golden age when America was at its best. Possibly we will experience a wage floor period long enough for people to decide they like it.
I worked for minimum wage in my youth. Darned right I liked a pay raise.
7 comments:
"They pay people not to work"
There are plenty of reasons people are hesitating to return to work, and I'd venture the least of them is the subsidy.
Unemployment insurance is inadequate for most even with the COVID increases. The economy was teetering prior and COVID pushed it over the edge. Regardless, every dollar paid goes right back into the economy, and workers have lost a year of progress towards the American dream of "ownership", as they struggle to keep afloat.
What a privileged, entitled and heartless attitude. Republicans immediately jump on the trope of "those worthless parasites", even when it's likely a big chunk of their own voters. Not the CEOS who donate to keep their taxes low and wages depressed, but the culture warriors filling the booths at Applebees, or actually not, since they can't afford it. Red states are cutting unemployment benefits as a virtual whip on the backs of workers who now will risk COVID in anti-vax communities. There's an experiment for y'all.
My concern is that the economic aftermath of the pandemic has yet to arrive. The government can only do so much for so long.
Maybe if we let in immigrants more with a work visa, we could fill some of these jobs. Mill workers in the 60s made a middle class wage. Do they still? Or have machines replaced many of them.
Trimmers are making $20-$25 an hour during Potober. Results in nursing homes and care facilities losing half their $11.50 / hour workers for two months. So do the nursing homes increase their wages to attract more workers or retain the experienced ones? No. They just pile on the hours to the remaining workers, none of whom are full time anyway - getting 30 hours a week so the owners don’t need to pay benefits. I suspect what they save in employee costs is spent in training and malpractice insurance premiums. Would be interesting to determine if the frequency of nursing home regulatory actions and malpractice claims in the valley are greater in a statistically significant way during the marijuana harvest season, when staffing is low and aids are overworked.o
Trimmers are making $20-$25 an hour during Potober. Results in nursing homes and care facilities losing half their $11.50 / hour workers for two months. So do the nursing homes increase their wages to attract more workers or retain the experienced ones? No. They just pile on the hours to the remaining workers, none of whom are full time anyway - getting 30 hours a week so the owners don’t need to pay benefits. I suspect what they save in employee costs is spent in training and malpractice insurance premiums. Would be interesting to determine if the frequency of nursing home regulatory actions and malpractice claims in the valley are greater in a statistically significant way during the marijuana harvest season, when staffing is low and aids are overworked.o
The current economic picture isn’t inflation caused by a commodity price increase like the oil embargo of the 70s. This is the kind of inflation that occurred in World War 2 with massive infrastructure projects and war mobilization. If memory serves, price controls were also initiated. We were growing our way out of the Depression, the effects of which were lingering. High unemployment and homelessness etc. Government spending to gear up the country to win the war proved to be the booster shot the economy needed. Truly an economy that floated all boats. Biden’s infrastructure bill is as ambitious and has the potential to throw off the lingering effects of the Great Depression and the CoVid pandemic. I’m optimistic, if the Bill passes it will turn out well. Price control may also be needed again. Such controls could go a long ways to end the majority of homelessness.
“America has had meaningful wage floors in the past, including during the 1950s period that Trump suggests to be the "Great Again" golden age when America was at its best.”
In the 1950s, the U.S. also had much higher tax rates on corporations and high-income earners. Nonetheless, Trump considers them the good ol’ days because back then, before everyone became so "woke," a white man could shoot an Indian, lynch a black and beat his wife with impunity.
Three anecdotes from the “serving class” where I live at Cascade Senior Living. The kitchen supervisor says he cannot hire enough servers to open the dining hall even though most residents have been vaccinated. Applicants ask, “How much is the pay?””$13.00 per hour.” “ Thanks, I’ll call back tomorrow.” No call back happens. The supervisor then calls the applicant. They do not pick up the phone or return his call.
A faithful server is angry that people are getting this extra money by staying home.
“Some are getting $3000 a month and I only get $2000 a month by working every day.”
“This is wrong.” She is in her 50’s, cares for her disabled husband and mentally challenged grandson. Another front desk worker was receiving unemployment plus the COVID benefit but decided to return to work for fear her good little part time job would be filled by someone else so gave up the $200 per week (Covid benefit). She says she is one paycheck away from homelessness and she is lucky to live with her boyfriend.
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