America’s wage shortage

Is there a labor shortage?

The long-term unemployment numbers suggest a loose labor market, while reports of many jobs going unfilled, and of workers quitting their jobs in record numbers, suggest a tight one. One interpretation is that US federal aid has been too generous, leaving workers undermotivated to return. In reality what we’re seeing is the logical conclusion of a long-term wage shortage, particularly in the service industry. 

Economics is based on the premise that humans behave rationally and with self-interest. So why would we expect workers with little job security, few benefits and low wages, who may not yet be vaccinated, and who may not have access to affordable childcare, return to work, simply for the sake of working? 

5.9%: US unemployment rate in June 2021

444,000: Seasonally adjusted initial claims for the week ending May 15, 2021, the lowest since March 14, 2020

256,000: Seasonally adjusted initial claims for the week ending March 14, 2020

8.1 million: New job openings at the end of March 2021, a record high and the most recent period for which data is available

34 million: Americans who have been unemployed for 27 weeks or more, as of June 2021

2.7%: US quit rate in April 2021, a record high

According to the Bureau of Labor Statistics, “quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs.” Four million people quit their jobs in April. The departures were concentrated in retail (106,000), professional and business services (94,000), and transportation, warehousing, and utilities (49,000). 

The massive economic contraction caused by pandemic lockdowns led to a fundamentally different type of recession than those we’ve seen in the past. 

April’s 266,000-job increase was significantly less than desired, but the US also saw 430,000 people return to the labor force—that is, start searching for a job again after giving up on finding one—making for the largest gain in six months.

It’s not the people who set the wage who will be speaking directly to the interviewees at the job fair—it’s the middle-managers. Perhaps it’s this layer of separation that keeps wages from going up at many types of businesses. It’s rare that company leaders have to look job applicants in the eye and say, “Thanks for coming in for an interview; I hope you don’t actually need much money.” Maybe that’s why they tend not to realize the absurdity of the situation they’re creating.

–Jessica Carney ,nonfiction writer and host of the “And Then I Quit” podcast.

Read more here. 

More teenagers are working than usual—for Black teenagers it’s a record high since the BLS started tracking teen employment in 1972. Economists caution that young people could lose out in the long run if they prioritize work over education.

Meanwhile, the share of the population that is retired increased from 18.5% to 19.5% during the pandemic. Economists believe this is a one-off, and that people who had been close to retirement age were more likely to sign off earlier than planned during the pandemic. 

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