Why America Has a Long-Term Labor Crisis, in Six Charts
wsj.comAll those charts look pretty good. “A carpenter now is making 20% to 25% more than they did 24 months ago, and that is not sustainable.” - some employer. This is a feature, not a bug.
This is the usual employer whine. Can't get exactly the employee they want, right now, where they are, for what they want to pay, without investing in training or guaranteeing long term employment. World's smallest violin plays.
> “A carpenter now is making 20% to 25% more than they did 24 months ago, and that is not sustainable.” - some employer. This is a feature, not a bug.
If that holds true for the average employee then it's inflation, not a wage increase.
In that case the losers are people paid in cash, which is most employees.
No, the losers are the people who are not employees: business owners mainly. Hence the whining and throwing of toys out of cots.
If prices keep up with inflation then the business owner is no worse off. They have most of their assets in the business, which is better than cash.
The losers are people paid in startup equity while their CEO gallivants about as an "investor".
"Labor shortages can be eased by funneling more people into the labor force or making the current workforce more productive. That can be done through immigration; outsourcing more work overseas; tapping underutilized labor pools such as people with disabilities and the formerly incarcerated; and improving productivity through automation, training and refining business and production processes."
Another underutilized labor pool: parents. Specifically, mothers. Universal childcare couldn't come quickly enough.
Surprisingly, “paying existing workers more” didn’t make the list. Businesses are unhappy their margins are going to compress with the go forward cost of labor, and taxpayers are unhappy they’ll have to pay more to compensate workers providing government funded services (healthcare, education, schoolbus drivers, etc). The US has hit its “labor credit limit” and is cranky about it.
Example: https://www.eastidahonews.com/2023/09/idahos-direct-care-wor...
> The committee heard follow-ups to a February report issued by the Office of Performance Evaluations that found Idaho’s direct care workforce is short about 3,000 workers compared to national staffing levels. That report identified low pay as an issue for the program primarily paid by Idaho Medicaid, whose rates “do not support sustainable competitive wages for direct care workers,” and create a “wage cap,” the report found. The typical nursing assistant in direct care made $14.16 per hour and could earn 39% more by leaving direct care, the report said.
There is no labor shortage, there is simply no longer surplus labor (due to covid deaths combined with structural demographics) enabling churn that kept wages low.
> “paying existing workers more” didn’t make the list
That falls under tapping underutilized labor pools. You're trying to take someone not working and convincing them to work.
There's about 8% slack in labor-force participation to late-nineties peaks [1]. But per the article, some of that is retirement. It's not a long-term solution to rely on paying retirees to come back into the workforce.
When an individual company (or state) faces a shortage of workers, it's often due to pay. Idaho should pay its nurses more. When an entire economy faces a shortage, it's something more structural.
As long as there are workers 18-65 who are willing to work at a clearing price who aren't currently working because that price isn't offered, there is labor available. Agree relying on retirees to remain in the workforce isn't a long term solution; there is no long term solution when you've built your economy on an ever expanding labor force that is no longer ever expanding. The data does not show we are out of workers entirely, but there are jobs workers are unwilling to take at the current wage on offer.
Will we face a structural labor shortage causing unreasonably low unemployment rates and labor marketplace friction in the near term? Very possibly depending on 55+ workforce exit rates and immigration flow. Are we there yet? I don't believe the data shows that.
> There is no labor shortage, there is simply no longer surplus labor (due to covid deaths combined with structural demographics) enabling churn that kept wages low.
There are a number of mental hoops that one must jump through for this statement to make any sense. A lack of surplus labor is what exactly, if not a labor shortage? How is a high supply not the exact same thing as a labor surplus?
It’s about proximity to the money printer unfortunately. Triffin dilemma. Like it or not, we’re not sending cash to nursing assistants in Idaho. If they wanted more money, they could’ve flipped houses in 2020–2022.
Please god no. We went through this already, it halved wages and made single income households a luxury. I personally don't want some stranger raising my kids for me, I want it to be me and my wife doing it. I don't want to delegate rearing of my children to the state, looking at educational attainment in aggregate, they're really bad at it. I don't care about a labor crisis, I care about my family. If wages go up, good. You're not taking my wife and making her your secretary or putting her on a factory floor to keep my pay down.
> I don't want to delegate rearing of my children to the state
Okay? Then don't. Universal doesn't mean mandatory.
Are you suggesting we should reverse womens' rights in the workplace so you can keep a particular family model?
> If wages go up, good.
Wages don't go up infinitely. They go up, then you run out of workers, and raising wages further doesn't bring more labour to the table. At that point, you cut services and increase prices to temper demand.
Bad faith interpretation. Clearly there are benefits to having a parent dedicated solely to child rearing. I do not think a daycare is the optimal environment for child rearing. The issue here is not women's rights but the responsibility we have for our children.
> Bad faith interpretation
Sorry, I am having trouble finding a gentler parsing of "we went through this already, it halved wages and made single income households a luxury." To what does this refer to if not women entering the labour force?
> do not think a daycare is the optimal environment for child rearing
I don't either. But the choice isn't caring parents or daycare. It's the number of parents who feel forced by the cost of childcare into being reluctant parents. Or single parents in economic insecurity, or worse, forced negligence.
> It's the number of parents who feel forced by the cost of childcare into being reluctant parents.
If childcare is such a significant cost that a family would make the economically rational decision to forgo the potential income of one parent, then the work of a stay-at-home parent is economically valuable, and moving them into the wage economy would not increase overall economic productivity (your original contention).
> Sorry, I am having trouble finding a gentler parsing of "we went through this already, it halved wages and made single income households a luxury." To what does this refer to if not women entering the labour force?
What I believe the parent is referring to is the lack of change in household wealth from a time when most households had a single earner to now when most have two full-time earners. Household wealth has remained stagnant for decades despite more overall hours being worked by parents. The gains from increased labor force participation have been eaten by higher costs and stagnant wages. More money is moving but the average family hasn't seen their wealth increase.
> what does this refer to if not women entering the labour force?
It was a reference to women having to enter the workforce due to inflation. Only a little over half of women want to work outside the home: https://news.gallup.com/poll/267737/record-high-women-prefer.... For women with children under 18, only 45% want to work while 50% want to be homemakers.
The fact we’re talking about “universal childcare” while ignoring the equally large if not larger demand women have for staying at home shows our warped priorities. Instead of universal childcare, we should just pay families for children and let them decide whether to use the money for childcare or to enable one parent to stay home.
I just figured I'd weigh in as a childless single man and say I'd rather not work outside my home either.
Yeah but you’re not serving an indispensable social purpose by staying at home and attending to your hobbies.
Eh, the way society is headed, I think we're better off with less children to feed to the collective grinder.
It's going to be a rough retirement for you if population drops too quickly. Other people's children are going to need to provide labor to support your retirement. Even if you and all of your friends intend to die at your desks, there are plenty of vital services that require a lot of labor that isn't well-suited to older workers.
Low fertility rates are a real problem across the developed world.
How silly. My dad grew up in a village in Bangladesh. He remembers a happy childhood. Do you think it’s going to get worse than that in developed countries?
I think that there is extensive evidence that happiness is not dependent on absolute condition alone, and often more signidicantly driven by condition relative to both past experience and contemporary context, so that your question is...largely irrelevant to experienced misery.
> more signidicantly driven by condition relative to both past experience and contemporary context
Well, if this is true, your point is moot. Children don't have past experience to compare to, they're children. Ask a 4 year old what 'contemporary context' is and you'll get a blank stare.
Kind of feels like you're arguing for the sake of arguing.
It’s a cold day in hell when rayiner and I agree on something but I think he’s got this one pat.
> The fact we’re talking about “universal childcare” while ignoring the equally large if not larger demand women have for staying at home shows our warped priorities. Instead of universal childcare, we should just pay families for children and let them decide whether to use the money for childcare or to enable one parent to stay home.
It would be interesting to see a direct cash transfer longitudinal experiment where you pay families for a parent to stay home and provide care for childrearing vs universal childcare, to see what that does to fertility rates and wellbeing of both care provider parent and the children being raised.
It seems so incredibly silly and shortsighted to be offering up free childcare to enable a parent to work when they could be working at home (if they choose!) raising their kid(s).
At the very least it seems shortsighted to pay for a different person to take care of the kid when the parent wants to stay home and take care of the kid himself or herself.
> Instead of universal childcare, we should just pay families for children
This is fine, as long as it’s cash and not a tax credit. I always imagined a universal childcare program being administered by states to be given a block grant by Washington. Most states would simply offer vouches/credits. Some would want to run it themselves. But in no case would the federal government be opening direct care—that is simply unprecedented.
What’s the concern with a refundable tax credit? I like the re-use of infrastructure and the strong precedents for prosecuting tax fraud cases that would be automatic if we ran it as a tax incentive program.
> What’s the concern with a refundable tax credit?
It requires the recipient file taxes in a timely manner; is paid ex post facto, which means expenses are being reimbursed in arrears; and requires good money management to last the whole year. Imagine if unemployment were a refundable tax credit: you get it, lump sum, credited against your taxes after you’ve been laid off.
Give the mother one year's worth of check in advance when the kid leaves the hospital (or when adoption is finalized). Then the first year was pre-paid and all subsequent years are pre-paid (from a timing perspective as well) via the taxation system.
> Wages don't go up infinitely. They go up, then you run out of workers, and raising wages further doesn't bring more labour to the table. At that point, you cut services and increase prices to temper demand.
wow, what a great problem to have. how common is it to encounter this issue? Amazon warehouse workers? Did they increase wages?
> how common is it to encounter this issue?
It's common in regulated professions where entry is gate kept.
To be clear, I'm not convinced we're in a general labor crisis. (Automation should release a lot of supply.) But claiming the concept is mythological is historically inaccurate. (See: raging inflation in mining towns and settlements, which were disconnected from large labour markets.)
> Amazon warehouse workers? Did they increase wages?
Yes [1]. And it's working in that they're managing to hire some people [2]. But productivity per employee is going down, which is directly feeding into increased prices to consumers.
[1] hhttps://www.cnbc.com/2023/09/19/amazon-adding-250000-workers...
[2] https://gadallon.substack.com/p/amazons-holiday-shopping-lis...
> Then don't. Universal doesn't mean mandatory.
Ah yes, the market fundamentalist argument of "market forces don't actually affect you". Wonderful, amazing, very good-faith.
> Universal childcare couldn't come quickly enough
That requires more workers to care for the kids.
Right, but at least here in Norway the rule[1] is that in kindergartens there should be one adult per three kids under 3 years old, and one adult per 6 kids above three years old. There's also requirements for pedagogical staffing so it works out to be a bit more than that, but not much.
Following such a scheme, on average you free up more workers by sending kids to kindergarten.
[1]: https://lovdata.no/dokument/NL/lov/2005-06-17-64/KAPITTEL_6#...
Paradoxically the Republicans in this country hate both raising wages for workers and immigration. The result is a labor pool issue in the end.
Almost like the Paradox of wanting open borders and higher minimum wages. The result being California, and the urban cores of Seattle, Portland, and Chicago
Labor exists, just not at the wages offered by employers.
Unsurprisingly, none of the solutions involve lower share of income for execs and shareholders in favor of larger share for workers.
Low value comment. This article is talking about the size of the labor force. That has not grown as quickly in recent years due to an aging population and other factors.
Tautologically at a certain wage you could convince the elderly and children to work but that’s not really useful compared to have a larger working age population.
> Labor exists, just not at the wages offered by employers
Source for the labor existing without immigration? There are tens of millions of people retiring compared to turning eighteen. Increasing pay should increase labor force participation a bit. But it doesn't solve the fundamental demographic problem.
If people are living with their parents later in life, and putting off purchasing housing because of cost [1] this could have non-insignificant impacts on successful courtship and reproduction.
[1] https://www.businessinsider.com/millennials-living-at-home-a...
To be fair, that's not an argument on solid footing. Sure, courtship will be affected but with time, things will change and living with your parents will be seen as the norm, as it was with the baby boomer generation (honestly, why did that trend change? Idk). I've heard enough stories of grown boomers living with their parents and picking up their grown up dates from their parents' homes, in an elaborate courtship ritual that would sometimes involve her parents too.
Why does it have to be without immigration? GP didn't say that...
Plenty of people want to come to the US btw, if you look at all the people coming over the southern border illegally. We just need programs to help those people do it legally, distribute them across the country (instead of concentrated in border states) and help them get acclimated to american culture.
> Why does it have to be without immigration?
The comment argues labour shortages are a fiction used to drive down wages. Immigration solves a labour shortage by driving down (or stabilizing rising) wages.
A lot of jobs don't really need to be done. They're only done because there's some demand for them. If wages increased in other places, workers in lower-paid jobs could be drawn away from those jobs, and those businesses can either adapt to less labor, or shut down. An example of this is restaurant labor. Restaurants in the US have an enormous number of workers per customer; it's a big reason why it costs so much to eat out there. Americans seem to expect to have a server constantly hovering over them.
If wages for other jobs increased a lot, servers could be enticed to leave the restaurant industry, and go elsewhere. No one really needs waiters. Customers can instead go to the counter and order themselves, and pick up their own food (this is usually called "counter service"). Eliminating all the servers in the US would free up a LOT of labor for more important tasks. This is just one example. People paid to pump gas at full-service gas stations is another (which has largely disappeared, except in two states, NJ and OR).
> servers could be enticed to leave the restaurant industry, and go elsewhere. No one really needs waiters. Customers can instead go to the counter and order themselves, and pick up their own food
You're describing totally different modes of dining. That said, this is probably the direction we're heading: servers will make more. And dining out (actual dining out, not fast casual) will become more expensive.
That said, you have a point. We have a lot of make-work jobs. cough cough TSA. We also have a lot of jobs that look likely to go away to automation, e.g. long-distance trucking and certain warehouse roles. So maybe this balances out on its own without consumer prices rising too much.
>You're describing totally different modes of dining. That said, this is probably the direction we're heading: servers will make more. And dining out (actual dining out, not fast casual) will become more expensive.
I'm also describing how the high (and getting higher) cost of dining in America is partly a function of American expectations. In other countries, dining is much cheaper, but from what I see, there's far less labor involved. Here in Japan, eating out is pretty cheap usually. (It's similar in Europe.) But there's less service: you have to actually yell for a server sometimes, or otherwise get their attention, because they're busy serving other tables or doing other tasks. They don't have time to come check on you, and in fact it would be considered rude if they interrupted your conversation just to ask you how the food tastes, but this is perfectly normal in America.
If American restaurants adopted a different service model and standards, costs would be lower, it's pretty simple. No one really needs servers hovering over them and chit-chatting with them and acting like their best friend.
I don't like to use TSA as an example because it's a government service, which doesn't operate under market pressure the same way as private business. My point is there's a lot of unnecessary labor even in privately-run businesses.
I have an impression that eating out is inexpensive in the US relative to median salary. Yes, it cheaper in many other countries but the salaries are significantly lower too.
If there are 100 workers and 200 jobs, those workers will take the highest paying 100 jobs. The other 100 openings go unfilled.
Quantities are not fixed. 1 worker could take 2 jobs (either by working more or harder) if the pay was a sufficient motivator.
There are only so many workers and so many hours in the day. More pay won't fix that.
I see it the other way around. Few people say: I don't work (or work less), because work doesn't pay enough. Everyone has to cover their own cost of living. On the other hand, plenty of people would actually work less, if they make enough per hour to cover their costs (or if they had enough saved up/passive income). There is a whole subculture around that, from four hour work week to lean fire, etc.