The So-Called Labor Shortage – Some Views, and the Best Courses of Action

The issue of businesses not being able to fill positions has been getting press since at least May.  How accurate and complete, though, is what has been published about it?

Before the big bill, we saw “Skilled Workers Are Scarce, Posing a Challenge for Biden’s Infrastructure Plan,” by Madeleine Ngo in the September 9^th New York Times.  It started with concerns from a construction firm expecting, or hoping for, a large contract “repairing aging bridges and roadways in the nation’s capital,” but wondering if they could find enough suitable employees.  The piece quoted a masonry-company owner saying that “the biggest struggle is finding guys that want to work,” but others cited here focused on the lack of experienced, skilled employees ready to join them.

In the same newspaper’s edition 18 days later, the author above combined with Jeanna Smialek on “Top Fed officials say the labor market needs more time to heal.”  The Federal Reserve then said that Covid effects were still too strong to justify raising interest rates.  The president of the New York branch also reminded us, also accurately, that “job postings are not jobs,” and likewise that “it may take quite a bit longer” than October “for the labor supply to come fully back.” 

Moving along to the Guardian on October 10^th, Gene Marks told us that “US wages are going up, and those who don’t adapt to the new reality will fail.”  This story, or at least its headline, should have been posted on human resources bulletin boards across the country.  The rocket science of economics need not be invoked to understand that when “job openings are at a historic high and small businesses across the country are begging for workers,” it means “the demand for a critical commodity is high and the supply of that commodity is in short supply,” making “prices go up.”  Some things are simple. 

So how about existing employees, who have often watched new hires get more than they do?  Per Charisse Jones in the December 10^th USA Today, “Workers can expect a nice raise next year as companies struggle to fill jobs, report says.”  We saw that “budgets for wage hikes are projected to jump 3.9% next year,” progressive but doesn’t approach the 6.8% latest inflation figure, and must include some anticipating offering less or nothing.

Finally, Rick Newman’s December 14^th Yahoo Finance “Maybe bad bosses are causing the worker shortage“ was misheadlined – it was also about several other factors.  According to Prudential research, a stunning 46% of employees “said they’re looking for a new job, or considering looking,” and, after those wanting to be paid more (45%), “lack of growth opportunities” was, at 26%, the second most common reason.  While raising compensation is “probably the easiest” solution, despite a dearth of workers for “a year or more,” “there was no notable pickup in average pay until recently.”  Ideas for getting and keeping people in positions Newman mentioned, along with the usual vague self-fulfillment things which are often more basic issues in disguise, included ending “rigid eligibility requirements” such as college degrees. 

Per the American Job Shortage Number or AJSN, 16.7 million of our citizens – over half again the recently reported 11 million job openings, would take employment if the terms were right.  So what should companies do?  First, they need to raise pay – not just a few percent, but 10%, 20%, or more – and for in-place workers as well as new hires, announce that future average levels will at least equal the inflation rate.  Second, rediscover corporate training, or, if it seems better, pay community college tuition, books, and fees.  Third, be aware of true market rates for well-defined jobs, such as machinists and warehouse workers, and at least match them for skilled and experienced employees and candidates.  Fourth, search for and destroy barriers, such as the education ones above along with many certifications, which were often put into place when the massive baby boom generation produced too many applicants.  Fifth, when appropriate, allow people to work remotely, but do not pawn off costs on them by being stingy about allowed equipment such as ergonometric chairs.  Sixth, don’t forget promotions.  Seventh, when all else fails, pay even more – and repeat that as often as necessary.  Companies that follow these recommendations will have the employees they need.