According to some entrepreneurs and Wall Street experts, US employers cannot hire enough people because unemployment benefits are too high. We pay people not to work, they say.
Certainly, something People who could work milk the system. That’s sad, but is that the only reason all of these jobs are unfilled? Probably not.
Nonetheless, several governors have decided to end the federally funded extended benefits. Instead of the planned September phase-out, they will now disappear in some states as early as next week.
If there are indeed social benefits that keep people from working, then the labor shortage in the states that quit them should ease. But I think the story has even more to offer. This problem existed before these additional benefits. Rather, it’s the result of bigger trends that don’t stop. If anything, they keep getting worse.
The US Chamber of Commerce has just launched a new America Works initiative. In her words …
The U.S. Chamber is advocating – and rallying the business community to urge – federal and state policy changes that will help train more Americans for sought-after jobs, remove labor barriers, and double the number of visas for legal immigrants. And the US Chamber Foundation is expanding its most impactful employer-led employee and professional training programs and starting new efforts to connect employers with undiscovered talent.
All good ideas as far as they go. But the Chamber believes there is a large pool of underutilized labor ready to fill all of these positions once some barriers fall. That is not necessarily the case.
Consider this chart from the US Chamber’s own report.
Source: U.S. Chamber of Commerce
If you compare the Department of Labor’s data on the number of available workers to the number of vacancies, there are now 1.4 available workers per position. In the opinion of the board, this is not sufficient. But notice a few things.
First, the ratio was even lower before the pandemic – around 1.0 in 2018-2019. The availability of labor is actually higher now.
Second, the rate has been falling for years. What is different now is that it has reached a point where workers and jobs are roughly in balance. No more surplus labor means that employers cannot afford the luxury of choosing from multiple candidates. This is new to them and of course some find it difficult.
The real problem with this is that we are creating fewer people.
Here has been the US working-age population (15–64) since 1977. It has stopped growing and is starting to shrink.
Source: St. Louis Federal Reserve
Of course, people can and increasingly are working beyond the traditional retirement age. Even very few 15-year-olds work full-time. But that gives us a rough idea of how many Americans could possibly work.
Here’s another look that shows the annual percentage change in the 20─64 age group.
Source: The New York Times
This is an important reason why employers cannot fill vacancies. In many cases, the desired workers simply do not exist.
Companies automate more tasks, but that too has its limits. This is from a current one Wired Story of a New Jersey restaurant experience with a robot waiter named Peanut.
Robots also lack the kind of intelligence, manual dexterity, and knowledge of human nature that any good cook, host, or waiter relies on to keep their guests happy. Can Peanut talk down a customer who is angry because their eggs were fried and not stirred? Can it skillfully serve a tuna tartare and avocado tower and a nice little sauce flourish around the edges? Can a robot stop a cook who is on the sidelines because someone labeled their creations as poor quality dog food? No way.
Even using a simple robot like Peanut requires some kind of negotiation between the machine and human workers. Basically: stay on your lane, robot. “They don’t come into play and they are not a good fit for us,” said Julie Carpenter, a research fellow in the Ethics and Emerging Sciences Group at California Polytechnic State University. “We’re negotiating how to get around them – they’re not smart enough to work around us. You are not cooperative. You are not collaborative. They only obey orders. “
Because of this interpersonal awkwardness, you can make strong arguments that there are some jobs that we just don’t want robots to do.
No doubt technology will improve. However, this is happening slowly and businesses need help now.
Those years of surplus labor can backfire. Managers who might pick the crop just don’t know how to deal with being on the other side. This could explain why some of the worst bottlenecks are in industries like restaurants and construction, known for insecure pay, harsh conditions and poor job security.
supply and demand
This is not just a US problem. The Chinese government, facing its own demographic decline, recently said couples could have three children instead of two. Other countries are also trying to encourage more births. Nobody has much success.
Falling birth rates may not be entirely voluntary. Some scientists warn of global sperm count decline due to chemicals in the environment. Others deny this idea. But whatever the reason, we stopped producing as many workers as the economy needed.
The law of supply and demand says that this scarcity makes the existing workforce more valuable and pushes them towards higher wages and better conditions.
In other words, the long-term outlook could point to an economy with better paid workers, with higher wages possibly being due to lower corporate profit margins.
What would this economy look like? Very different from the one we have now.
My partner, John Mauldin, predicts an unprecedented crisis that will lead to the greatest loss of wealth in history. Most investors are unaware of the growing pressures right now. Find out more here.