For small businesses, they often can't survive the labor cost increase because bigger, monopolistic enterprises have cut their available operating margin through means unavailable to an aspiring entrepreneur. Saying they don't deserve to exist is giving way too much credit to the incumbents in many cases.
There is another dimension to this that most people haven't talked about, remote and gig work. For most small and medium businesses, it's cost prohibitive to hire remote employees. For larger companies it's very easy. This has created a regional imbalance.
Lots of knowledge working and call center opportunities are moving to full time remote. Paying employees the same with better benefits to never leave their house.
I wish people would stop saying this. It's pedantic and doesn't reflect what's happening. There are 5 million fewer people working today than before the pandemic. It's an actual shortage.
Not to mention that raising wages really only helps localized labor shortages.
If you raise wages and get employees from your competitor, then you’ve moved the labor shortage to another company but it still exists.
The only way raising wages helps with a labor shortage is if you hire from a pool of people either currently unemployed or people working in a field with a labor surplus. For the latter, I don’t know what fields have a labor surplus right now and it’s uncommon for people to be skilled enough to do two completely different skilled labor jobs that are worth equal pay that this can be an option for the company.
For the second group, hiring the unemployed, $10 an hour is already significantly more than $0. So if you think raising it more would make a difference, you need to explain what $11 an hour would do that $10 doesn’t.
For instance, some people can’t work because the cost of daycare exceeds the income they’d bring in. Raising wages could change that formula… though I’ve also heard from daycare operators that they are dealing with a labor shortage. If they raise wages then they raise daycare costs then other companies need to raise their wages even more.
Some people can’t work because school is doing remote learning. These people can’t work no matter what the wages offered are.
And of the people who are working low wage jobs, Amazon hired 500,000 of them. Small restaurant operations are notorious for wage theft and poor working conditions. Amazon jobs can be a grind, but you do get paid.
Technically, those Amazon jobs are median wage jobs in the US. And in large parts of the US you can easily live a decent no-frills life on the $36-37k Amazon is paying. Restaurant jobs vary widely. In my city, a good server gets paid much more than an Amazon warehouse worker. The erratic restaurant shutdowns or partial shutdowns over the last 18 months made it impossible for restaurant workers to get reliable hours, which forced restaurants to change the way they do staffing and that dynamic has created an equilibrium that is difficult to get out of.
So if there's a 5 million people who can work that aren't working, that shows there's a shortage? That makes zero sense. If 5 million people are standing around not working there is a job shortage, not a labor shortage. We have a shortage of businesses which can pay non-poverty wages for workers. We also as the article says have a "skills shortage", which again is a lack of employers willing to hire unskilled workers.
That fundamentally is because of the increasing value of capital over labour and the supremacy of efficient monopolists over the small businessmen. Simply small businesses cannot make good business models where their workers are getting paid twenty bucks. It's about the expansion of the welfare state to fill the gap where these small businesses are failing, we have seen the expansion of pseudo universal basic income programs to fill the gaps that small businesses could not fill.
The problem is not a labor shortage, we've figured out the labor shortage, we have more labor than you can shake stick at. The bigger and more fundamental issue is the concentration of power in big monopolists and the increasing irrelevance of small businesses which can only hope to ensure enough of the population is impoverished and enough of the welfare state goes through them that people will come crawling back to their jobs mopping up the bathroom at a wing shack for poverty wages. Yet the writing is on the wall that the "labor shortage" will be resolved by having these businesses close down, and then when there are no open job postings, just like that the "labor shortage" will disappear being revealed as nothing more than the propaganda of a faltering social class.
We will then be forced to deal with the real problem which is the fact that labor can't produce enough surplus output to provide for themselves. The terrifying reality of this automated world, accelerated by a global pandemic. There is no pedantry going on here, because pedantry refers to people nitpicking minor details, calling this a "labor shortage" is COMPLETELY missing the point.
I’m curious how the workers can afford not to work. I’ve been hearing my whole life that some high percentage of Americans have almost no savings and are one missed paycheck from problems. Maybe a lot of better jobs are now available? Unemployment is all done so probably not that
I know several people in this position. They are largely choosing to work the minimum number of hours that pay the bills instead of a steady 40-ish hours per week at a main gig because that has become difficult. These are people that make $20-40/hr and accustomed to living inexpensively.
The entire system is caught in a vicious cycle. Restrictions on businesses left them in zombie half-open/half-closed states that destroyed their staffing for the last 18 months. Employees and employers adapted to the reality that aimless government mandates would almost arbitrarily change their staffing requirements on a week by week basis. Employee behavior changed to diversify their exposure to this risk, spreading a handful of hours across a large number of businesses. Inability to reliably staff means businesses are significantly reducing opening hours, which means that employees that do want regular 40 hours are having a harder time getting them even though businesses have few restrictions now. Because it is too difficult to coordinate across multiple part-time jobs, most limit it to a manageable subset that pay enough to pay the bills; even though they are making less than before they've learned to live in this new reality somewhat comfortably. Also, many service workers left the city and moved back home during this time to save money, and it still doesn't make much sense for them to move back.
At least in my city, the various business closures and restrictions over 18 months broke a metastable economic equilibrium and we are now stuck in a new equilibrium where even well-paid workers have their hours fragmented over multiple jobs. Everyone is finding it difficult to reverse this situation because it doesn't make economic sense for anyone individually because it exposes them to a lot of risk -- everyone would have to change their behavior together. I expect things to return to normal eventually, the current situation profits neither employers nor employees, but it will take a while. There is an interesting economic lesson here.
They lean more on their parents , collect various benefits, etc.
I had a good friend of mine brag about getting a some SNAP to get chips , combine that with parents who don't mind you doing nothing, and why work. Theirs's an entire anti-work sub on Reddit dedicated to this mindset. I've become rather grateful for my childhood instability now, it taught me to stand on my own two.
that is kinda fascinating.... something I wouldn't mind after bouts of dev burnout...
though, I'd rather maybe start a tiny house community, w/ some shared spaces, and a glamping site that pays the bills so we can at least not be destitute... self-sustainable-neet'ism... if you will...
Maybe we'd build tiny homes from earth bags, and be very eco-friendly like earthship homes.... that'd be nice... we could also have an outdoor movie theater, and lots of outdoor activities...
Well there's a massive rise in homelessness around the country that never seems to be mentioned, so there's a lot of people just tapping out of society.
> I’ve been hearing my whole life that some high percentage of Americans have almost no savings and are one missed paycheck from problems.
I've known many people like that who had high incomes. They simply spent all that was in their pocket. If they had less in their pocket, they spent less. If they got a bonus, they'd buy a ski boat. If they needed some cash, they'd sell the boat.
I have done no research on this but maybe these are dual income households where one spouse stopped working to take care of children because of covid closing schools and they adapted to a single source of income. With childcare cost are there any reasons for them to go back at this point if the wages are low enough it doesn't make financial sense?
>I have done no research on this but maybe these are dual income households where one spouse stopped working to take care of children because of covid closing schools and they adapted to a single source of income.
Daycare was already expensive, know plenty of people myself included who are no longer doing it because they work from home. None the less because of COVID protocols meant less space in the daycare. Daycare really needs to be subsidized so costs can come down without totally screwing employees.
Honestly if 5 families could go in together, purchase land, and build community homesteads, you could build homes for everyone for 10-20k a pop, and maybe share tools, printers, and other big ticket items not worth owning in tiny quarters.
Professionally constructed homes for 400k, or for 200k you can get homes for 5 families (maybe a lot more depending on the land deal).
Then each family can easily live the 50's lifestyle w/ one parent working one taking care of kids... I hope more people start doing this, and as much as "tiny homes" are trending on youtube, etc I don't think it's a stretch to think it might take off and maybe even lift up renters, and bring down rental empires.
Anecdotal but I know 4 Boomers who retired during covid. I also know a lot of younger folks who opted in to the gig economy instead of working at a store/restaurant, including 3 of my nieces and a nephew.
DoorDash went from 850ish million to 2.6Billion dollars in 2020 with over a million dashers and they account for about 45% of food delivery in the US.
If labor’s bargaining power is indeed sufficient to significantly raise wages, it will be interesting to see if higher wages eliminate large swaths of low margin industries, and price surviving businesses in those industries out of reach of most people. For example, restaurants are only accessible to lower-middle class and up patrons because of how underpaid their employees are. Pay them an actual living wage, and restaurant dining will become prohibitively expensive for most people. As a result, there will be far fewer restaurants and therefore far fewer (but much better compensated) restaurant employees.
I think the problem with this argument is that wages have risen yet labor participation has fallen. I put some of the blame on increased barriers to work: screening, tests, background checks, automated resume filtering, long and difficult interviews, mandatory credentials for jobs that don't need them. It's cheaper for companies to aggressively filter and have permanently unfilled spots, than train or take risks with sub-optimal hires.
I am curious about this. One company I know raised wages, but is being more picky as they think they should get more and are less willing to take risk.
Well, and at a price that will result in prices for goods that customers are willing to pay. There is no shortage of services that people would like but that middle class-ish people can't/won't pay for if they have a large labor component.
Maybe I'd like to be able to ring up a personal chef. But I'm not actually going to pay for that.
Sure. You're not going to say that means there's a shortage of chefs though, or lobby for policies that undermine the labor force's negotiating position with the aim to cut their wages until you can afford one.
Even when the money is decent, the part time nature of work combined with ”optimized” on-demand scheduling that interferes with other errands (such as dropping off and picking up kids), makes people iffy about applying for any low-level retail or hospitality job.
I've been wondering about this. Why is commerical real estate so expensive? Would that not suggest that there is a high demand by companies to operate somewhere? Or is it similar to other real estate, where giant corporate interests see value in controlling a scarce asset
Can’t find the source, but the long of it is that the value of commercial property is a function of the rent that you can get.
If you are ‘looking’ for a renter at a given rate, then the value isn’t reassessed.
If you lower your rate and rent it at a reduced rate, then the value gets reassessed. If it gets reassessed too low, now your loan gets margin called and you need to pay cash to keep your loan to value within a set range. If you don’t have that money, then it’s in your interest to keep looking at unrealistic rents.
There is also commonly a provision to tack missed payments on to the end of the loan + interest so the financiers aren’t that quick to foreclose. Finally, any changes to the agreement require a % of financiers to agree which gets difficult when the financiers get more numerous.
It's kinda like NYC, where the prices are still astronomical, but the demand is just not there. They just aren't willing to negotiate the price, because the other's aren't changing their prices, so they all sit vacant.
This assumes the workers are choosing between no income and low income when they are actually choosing between low income and low income (but no work).
The preponderance of factors kicked off by the pandemic is really interesting and I imagine it will be studied for quite some time. You have people retiring, people finding better paying jobs after being laid off en masse, service-workers tired of being harassed by stressed and belligerent customers, people simply tired of making terrible minimum-wages... it goes on and on.
Well, if we're going to go there, it should be pointed out that there's lot more people who were not working, who added to aggregate demand but contributed no labor.
I mean I agree, COVID has definitely impacted the workforce in a wide variety of complicated ways and even then its not necessarily a 1 for 1 of working adults dying. Also, due to COVID complications there have also been a lot of people who are now disabled/unable to do their previous jobs which also impacts these numbers. I just wanted to point out that while 150k is a lot of people, its not really a massive percentage of the overall US workforce.
No. That is a "with COVID" number, not a "from COVID" number. You really can't escape the truth that the public policy response to COVID was a mistake –– a very grave mistake. Nothing should have been shut down, and the contrarians who said so at the time were vilified then and continue to be vilified. But they were right.
Hmm so purpose of the response was to avoid deaths, and now that that happened you downplay the situation to say "See ? We didn't need it"
That's like saying "I haven't died in 10 car crashes with my seatbelt, that must mean crashes are not really that bad so there's no point in using the seatbelt"
It's worse than that. It's a banker saying since he won't need health & safety regulations sitting at his desk the men working in coal and steel don't need any either. You do wonder if they say these things out of malice or confusion, but for practical purposes the distinction is immaterial.
The most damning is the graphs at the bottom of the report. This is clearly not just covid, and follows a trend line in NFIB's data since at least 2010.
Since Covid, NYC daycares have uniformly updated their sick policy. Child has fever or one diarrhea, has to wait home 3 days before returning. E.g.: Daycare calls the parents to pick up a sick child on Tuesday midday, child can return next Monday at the earliest.
While it used to just barely make sense to send kids to daycare for parents with 2 kids with each parent earning $120,000, it is now simply impossible unless a parent stops working or both parents have extremely flexible jobs where they can put their professional duties on hold for half a week without notice.
The labor force participation rate looks absolutely terrible. You see the huge immediate drop when Covid hit, then a nearly-as-immediate bounce back recovering half the loss. But since August 2020 it's been flatlined. Are those people ever going to re-enter the workforce? Our recent history suggests maybe mostly not.
There are companies that simply bite the bullet, raise their wages and expand their market shares. Others whine they can't find anyone and eventually that the business down the road is taking all their customers away.
This is part of the irreversible trend towards a post-scarcity economy , funded by a combination of federal transfers (such as Covid stimulus) and ballooning appreciation of private sector wealth. Look how well google and tesla stock have done. US population growing at 1%/year while assets are appreciating at 20-40%/year (such as FAANG stocks,start-ups, crypto, S&P 500, Nasdaq, real estate, etc.). Hence more $ for everyone through trickle-down effects and less need to work. As the number of new millionaires and billionaires keeps rising, so too does the $ that flows downstream from them such as friends and family, such that the probability approaches unity that someone will know someone who is rich and may not need to work. I know young people in such a situation now where their parents are so rich that work will not be needed. Go on Reddit fire/investing communities and plenty of posts about large inheritances.
The market has spoken. If your business can't survive at market labor rates, it doesn't deserve to.