OT: Employment/Labor Shortage/Wages question
This may be more of a question for managers or business owners out there.
Right now businesses are experiencing a labor shortage. However, unemployment numbers are at a very low 4.2 percent. So how is their a labor shortage with historically low unemployment rate?
With 'said' labor shortage, businesses are jacking up wages to find workers. Low end wages are going up. Common places like McDonalds up to places like Hemlock Semiconductor and others skilled trades are hiring at high premiums. However, are existing workers seeing their wages go up, or is it just the new/unemployed people?
Inflation is higher than it has been since late 70's and it seems to me existing workers are not nearly keeping up with it, but if you job hunt, then you can take advantage of much higher wages. Is this what other people are seeing?
December 21st, 2021 at 2:50 PM ^
My friend is the director at a Michigan Works Agency and he said right now the biggest hurdle for families is lack of childcare resources. So a lot of people aren't even getting to the job search phase because they have no one to watch their kids
December 21st, 2021 at 3:03 PM ^
This is a huge reason. With childcare costs nearly equal to what someone’s wages would be, the math clearly shows it makes sense to stay at home with your kids
December 21st, 2021 at 4:12 PM ^
That’s what we ended up doing with my kid. He’s 9 months old and my wife has been staying at home with him since her wages essentially paid what daycare would have been, and we’d rather her spend every day with the baby than him be at a daycare anyway, but it makes the decision so much easier when the costs are the same.
December 21st, 2021 at 2:52 PM ^
existing workers are not nearly keeping up with it, but if you job hunt, then you can take advantage of much higher wages. Is this what other people are seeing?
My company is hiring new college grads at salaries higher than post grads who have been at the company for a year or two and people are pissed about it. However, they don't really care if we leave because they see employees who have worked there for only a year or two as replaceable
With 'said' labor shortage, businesses are jacking up wages to find workers. Low end wages are going up
Do you have any numbers to back this up? From the job postings I've seen around where I live, I have yet to really see that
December 21st, 2021 at 3:05 PM ^
There's a lot of anecdotes about the hiring "up to" $17 an hour where it's really much lower than that
December 21st, 2021 at 3:12 PM ^
My son was hired at $12/hr last summer doing factory work. By the end of the summer, they were paying $15/hr and are now at $17.50/hr and still can't find employees. He went away to school and got in at a local Walmart making $17.50/hr. Of course inflation hasn't affected him much because tuition, room and board were locked in before everything took off. He's actually made enough to pay off the year without taking out any loans.
December 21st, 2021 at 2:53 PM ^
Business owner here.
Typically, unemployment numbers are tied to those who are looking for work. Those who have dropped out of the workforce entirely do not show up in those numbers. For example, the homeless guy under the freeway underpass doesn't show up in unemployment numbers.
In my business, hiring people at reasonable wages has been fine. But with that, we only hire highly skilled people with specialized capabilities. So wages are high, but market, so I'm fine with it. My suppliers are a different story, which leads me to...
I think the crux of this topic lies at the bottom end of the skills pyramid. The fight for $15/hr, etc. Government stimulus helps them more than others and enables them to slow play their job options. It gives those at the bottom more power, which isn't bad, but it's not at equilibrium.
December 21st, 2021 at 3:26 PM ^
See, I look at this from completely the opposite viewpoint Blue - if the people at the bottom of the wage pyramid now have options, can choose among jobs (weighing work schedules, benefits offered, wages) then we might actually be approaching equilibrium!
I'm in hospitality, very front line/public facing jobs, and many have not as yet elected to return to our industry. Masking, vax requirements, requirements to check guest's vax records, the risks inherent with interfacing with potentially hundreds of people from myriad states & countries every day.
There's a tremendous disincentive to return to this kind of work - think about that when your favorite bar or restaurant or resort has reduced hours, reduced capacity, reduced menus.
And that's not even broaching the topic of what we can't even purchase because of shortages caused both by people in those jobs feeling exactly the same - and, quite frankly, the incredibly stupid trump tariffs, which are exacerbating the difficulties of acquiring the things we want or need.
December 21st, 2021 at 5:30 PM ^
Every industry has different dynamics. For instance, whatever stupid trump tariffs to which you are referring doesn't impact me (in fact, I don't know what you are talking about). For me, I need my suppliers, which are typically blue-collar US workers, to manufacture the medical devices I need to sell to my surgeons. There is a good chunk of medical device factory workers who reside on the lower end of the wage spectrum, so I see some of the affects of what's currently going on. For instance, lead times and per unit COGS have sky rocketed!
As for equilibrium, I don't think we're approaching it in my industry. The fight for $15/hour, while noble in its underlying objective, is really a red herring that only serves the politicians that fight for it, because $15/hour won't help anyone when considering for things like current price inflation and globalization. A year ago, I wouldn't think about moving our manufacturing off-shore, now we are currently looking to move things to Taiwan or India (or maybe Dom Rep). And I know lots who would are considering it in my industry.
December 21st, 2021 at 6:55 PM ^
Question: why are you not able to just pay the Americans workers more money?
December 21st, 2021 at 7:28 PM ^
Conceptually. That line of thinking only works for a very few very successful companies. Think google, Amazon etc. The vast vast majority of small businesses do not have that liberty to simply just pay workers more.
Which is another potential unintended consequence for raising the minimum wage drastically. Big box stores can do it no problem, but mom and pop places have less freedom to do so, thus really only helping large corporations in the long haul as mom and pop shops can’t keep up with raising minimum wages.
Specifically for my business, it’s much more than just cost, it’s lead times. I have a microprocessor for my devices that used to cost $10/piece and take 2 months in the US (lots of parts do come from china). Now they quote me at $150/piece and a 52 week lead time. I’m in healthcare/medical devices and the only price that is acceptable is a lower price, full stop. We recently approached Northwestern Memorial Hospital to ask for a higher price in our devices due to supply chain hurdles and inflation and they basically laughed. In fact, the approach almost backfired since their reply was basically “since YOU asked for a price increase, now WE actually want to ask for some price concessions if you want to keep the account”. Luckily we were able to keep it at the same price as before. But at the margins we are getting now, it’s not good business. Getting COGS and lead times down are now paramount to keep my business going. I’m not going to China, but Taiwan, Indian and certain parts of the Caribbean will do at the same quality, but much faster and at lower price points.
December 22nd, 2021 at 5:38 AM ^
do get in touch with me regarding manufacturing in India if you do go down that route.
vipul(dot)jain(at)outlook(dot)com
December 22nd, 2021 at 10:48 AM ^
And if you move your operation to the developing world will you decrease the price you sell the device for to coincide with the decrease in labor you’ll pay. I’d guess not, which is why most people don’t want to hear about we’re losing money with increased wages at the bottom. Maybe take some money from the managers and sales people who really are replaceable and you’ll be squared away. But yes, it is going to be hard to raise the wages at the bottom without either taking it out on consumers or the more justified approach cut back on upper management salaries and the such.
December 22nd, 2021 at 11:26 AM ^
I will not decrease the price because as it stands now in the US, there is almost no business case to continue selling my devices at the COGS we are getting. Remember, labor is just one part of many in the COGS. There’s raw material etc.
December 21st, 2021 at 2:56 PM ^
From what I've heard at least, there seems to be a disconnect between the large number of people currently looking for jobs, and the very large number of open positions. The explanation seems to be that the jobs that are open (typically lower paying service industry positions) are not the jobs that the people looking for work want.
Whether you agree with it or not, since the start of the pandemic there has definitely been a shift whereby people are much more selective about what jobs they take or keep, even people that are currently unemployed...
December 21st, 2021 at 3:00 PM ^
I mean part of it was that people didn't want to risk getting sick for low pay. I have teenage kids that could have worked but I didn't want them to until they were at least vaccinated. My 15 year old started her first job as a hostess last week.
December 21st, 2021 at 2:59 PM ^
Overall, it seems to be a problem that’s spreading in terms of its reach. As many have said, I think there’s a lot of retirements impacting the job force now, and we are still kind of stuck in the “You must have X years of experience to do Y.” I suspect we are going to have to recalibrate that in a major way to fill roles out in the white collar workforce over the next year.
I’m a little disheartened by the fact that most companies don’t seem to be very pro-active in retention right now. IMHO, smart companies should be providing reasonable increases to employees they really want to keep now, before they even look around. I just had a coworker leave for a gig across town for 150% of his current salary to do the same job.
December 21st, 2021 at 3:16 PM ^
Where I work, my specific team had a bad year -- but it's been identified as a MASSIVE growth area, so instead of firing us all or cutting bonuses or whatever, they're actually giving us all really impressive raises (like over 30%, and it was hardly a low-paying job before). I assume they realized that it takes years for people to be properly trained to do the work that we do and a we lost 5 people from our team of about 25 to higher paying jobs. So I'm very grateful that the powers that be recognized this and are taking care of us.
December 21st, 2021 at 3:02 PM ^
I work for a very large Japanese manufacturer. Have 5 open sales positions right now. Job with benefits and bonus is about $175 - $200k. Financial services.
I have had 3 people in last 5 months accept and sign offer letters only to contact me near start date and say their current employer upped their salary, bonus or provided equity. It is very hard to get good people. In addition, our main office in Dallas area and there is a competition between finance companies for talent in credit buyers, funding analysts and customer service folk. Very strange time. But great if you are looking for a job. The old days of working for a company for 30+ years are gone. People need to be willing to leave their company and they can make big money.
December 21st, 2021 at 4:08 PM ^
The idea of working for a company for 30+ years was an outdated practice and COVID caused more people to get on board with the "leave for a better opportunity." The majority of companies, businesses, schools, etc do not care that much about the specific employee. We are replaceable in just about every role. Most like to think that after they quit a position that company is screwed and will really miss us, I've thought that before, only to realize they move on just fine without us once they get another person into that role.
The majority of places that employ people do not offer enough to keep someone there for 30+ years and people need to be okay with leaving those roles for better opportunities/salaries/benefits/etc.
December 21st, 2021 at 4:48 PM ^
Agreed. Not saying it is good or bad but it is reality.
I am hiring two internal candidates for these roles and we have to bump one of them almost 40% of their base to make them in line with the other sales people. They have both been with company over 10+ years. Most people still like comfort and are afraid of risk. But if you don't burn bridges and are willing to take some chances it is a great market for employees.
December 21st, 2021 at 3:04 PM ^
The labor market will self-correct in February when student loan payments resume. That extended pause, along with protracted supply chain issues, is what has created the current, temporary stagflation.
December 21st, 2021 at 3:28 PM ^
Can you help explain the linkage between student loan payments and stagflation, or the general state of the economy?
I'm genuinely uneducated on this topic and curious.
December 21st, 2021 at 4:56 PM ^
The average student loan interest rate hovers between 5 and 6%. That's on top of $1.5 trillion in student loan debt right now. So that's $15 billion dollars each month being kept out of normal circulation and in people's pockets. But the supply chain creates an inventory shortage, driving commodity prices, groceries, gas, etc. upward. Hence your high inflation. But anyone not actively in the workforce doesn't want to spend. Hence your stagnant demand. Now, once that moratorium ends in February, debt carriers are going to have to reenter the workforce whether they like it or not. (Although to be honest, I'm not sure if it's legal to garnish unemployment benefits for student loans).
December 21st, 2021 at 11:42 PM ^
Putin I don't know how you guys do it in Russia but some of your assumptions are deeply flawed and your conclusion is pretty far off as a result. Record consumer demand (NOT stagnant demand) is a major driver behind the supply chain challenges. There's not $15B left out of circulation sitting in savings accounts of those with student loan debt. That $ is being spent elsewhere and helping to drive supply chain problems and inflation.
Also, people with students loans can pause or reduce their payments if they are unemployed, so there will be no mass re-entry into the work force.
This guy is a great follow for data driven supply chain analysis:
December 22nd, 2021 at 11:39 AM ^
And on top of that you can choose to make student loan payments based on your last tax year. So people unemployed through covid could continue to pay nothing. Biden will likely extended the pause anyway
December 21st, 2021 at 3:08 PM ^
My company gives us a "merit" increase each year, and this year will be especially interesting to see where they end up. I say "merit" as the increase is basically an inflationary increase between 0 and 3%. If they go higher than 3% I will be very surprised.
I negotiated a 13% increase to stay where I am at for now. Most companies will not raise your salary to retain you without you asking. Now is the time to at least dabble, because the labor shortage is real....blue collar and white collar.
December 21st, 2021 at 3:13 PM ^
COVID’s impact on immigration has a role in this as well. 2020 (and likely 2021 too) saw the fewest number of legal permanent immigrants granted visas since the 1980s. Seasonal immigration was also halted for much of 2020 & 2021; these workers are crucial in filling roles in the food/beverage & hospitality industries, especially in tourist heavy areas. So you had this influx of new entrants to the labor force that we relied on without fail each year that we’re just not getting right now.
December 21st, 2021 at 3:39 PM ^
I don't know if I'm not looking in the right places, but I keep wondering why I'm not seeing anything more about the impact of immigration changes on the labor shortage. Is it too political? It seems very obvious that what you've described is a main factor & rather straightforward to understand.
December 21st, 2021 at 3:19 PM ^
My company has given us 2 separate "market adjustments" outside of our standard year end raises. This is driven both by cost to attract new grads has gone up so they had to raise salaries at lower levels but also because the offers my coworkers were receiving to go to other places.
December 21st, 2021 at 3:22 PM ^
"So how is there a labor shortage with (an) historically low unemployment rate?"
There's a double negative in there somewhere causing confusion - maybe? There is no mystery here. A labor surplus would imply high unemployment rates. Does that fix it?
Job surfing is a good strategy, but everything is related. Our company is revising salaries constantly wrt the market (and I might add obscuring that analysis to our employees.) The recent vogue is to put money toward bonus packages marketed as compensation, and the bite comes either when the bonus doesn't arrive or at tax time - where bonuses are taxed at higher rates.
I would advise any young person to always be closing. Inflation could drive out couch potatoes.
I'm not sure if the inflation bug will stick around long-term since it's not global. Instead, I think it is tied to Covid/Immigration and a few container ships off the coast. There could be some blockchain effect as well. In the long run - there is no safe place to put your money.
I would like a correction to any of this thinking.
December 21st, 2021 at 3:23 PM ^
I should refresh prior to saving comments. MaizeAndBlueWahoo has already responded on point. Move along. Nothing to see here.
December 21st, 2021 at 3:35 PM ^
To answer your question about whether or not existing workers are seeing their wages go up (this is an account from my place of employment and may not be a reflection of what other businesses/organizations are doing).....
I am a registered nurse. I have worked for the same organization for more than five years. I have showed up every day throughout the pandemic and cared for patients day in and day out. Currently, I am doing so with fewer resources than ever. Now, not only am I a nurse, but I am also the phlebotomist, the nurse's aid, the respiratory therapist, the transporter, and the environmental services specialist (yes, the expectation now is that I will also clean the patient's room after he or she is discharged) because the hospital I work for simply cannot keep the support staff employed (mostly based upon poor wages, but stress and workplace chaos are also major factors). Because we now do the job of five people, my organization gave us all a 2.3% raise and told us it was a "market value raise". In addition, in early October, they announced that they would be giving a $1,000 quarterly retention bonus, which is nice.
The problem is, nurses are leaving the organizations where they have been employed for years to become travel nurses, where they can make $4k per week to work 3 twelve hour shifts. As a result, I work side-by-side with travel nurses who make 3-times the wage that I do. My organization is willing to pay unreasonable amounts of money to these travelers, but won't pony up to keep its loyal employees around. As a result, every day I go into work, I hear of yet another colleague who is leaving. The mass exodus of nurses really creates problems in places like Intensive Care Units and Cardiovascular Units, as those nurses possess a skill set that is not necessarily attainable by just anyone, and it results in really unsafe care.
Lastly, many hospitals and healthcare organizations are offering sign on bonuses for new employees. My place of employment is not, which may be a mistake, as the hospital 20 miles down the road is offering $10k if you stay for just one year.
So anyway, there is my input (and rant) from my little corner of the universe.
December 21st, 2021 at 3:44 PM ^
I don't know where your corner is but it is the same here. Travel nurses getting crazy compensation while working side by side with relatively poorly compensated nurses and sinking morale. Good nurses leaving in droves.
December 21st, 2021 at 3:48 PM ^
Yes....and administration seemingly not giving a shit as nurses leave every single day. My hospital has recently began hiring travel Nurses Aids who are being paid about 1.5 times the wage of the non-travel nurses.
December 21st, 2021 at 7:02 PM ^
Keep up the good work (assuming you're doing good work ;) ). Healthcare is really hard right now. I'm in it, and it's so fucking frustrating day in and day out. Direct/immediate coworkers, other staff throughout the hospital, patients...they're all wearing on me. The burnout has finally hit. I totally get it man. I feel for RNs right now (and many of them are who I speak of above). This industry like others needs an overhaul.
December 21st, 2021 at 3:51 PM ^
My job is just about killing me. I've been casting around for a way out and finally started getting some hits. I'm not under any impression that I am irreplaceable, but I was in a big meeting today with a lot of my peers and I was looking around at their faces and feeling sad thinking about how my impending departure will set their projects back quite a bit. But I gotta get out. First offer I get for $1 more than I am currently earning (with a few caveats) and I am out the door.
December 21st, 2021 at 4:15 PM ^
Unemployment as low is it cited right now is arguably indicative of "near full employment" since there is always a percentage of workers who are "between jobs".
Another element contributing to a labor shortage - particularly in our current milieu - is that many who were approaching the end of their careers have simply accelerated that step and retired from the workforce, and have yet to be replaced.
Lastly, workers are not created (i.e. attracted to the job market) by inflation... it's the other way around. Inflation is caused by a shortage of labor, which drives up the costs of production through overtime pay and wage increases necessary to retain workers.
December 21st, 2021 at 4:28 PM ^
I'm not sure that you are understanding this correctly.
Low unemployment is precisely what you would expect to find during a labor shortage.
Labor shortage = not enough workers to fill available jobs.
Unemployment = not enough jobs for available workers
The two are inversely correlated. When there are not enough workers to fill the existing jobs, the expectation would be that those who want jobs are able to find them, thus unemployment will be low.
December 21st, 2021 at 5:43 PM ^
At the company I work for, wages for new hires have definitely gone up to around market rate but those of us who’ve stayed are definitely getting screwed over. We were below market before and now even more so. Regularly see new hires making $10-15k more than employees who’ve been in their positions for 10+ years.
December 22nd, 2021 at 12:01 AM ^
I am seeing similar at my company. Relatively small company in a small labor market, but the hires we've made in non-entry level position in the past year are making 30-50% more than the people they replaced in the same position - who left for better opportunities.
Leaves me wondering if it's time to move on as I'm grandfathered in to the "old" payscale and the company has had a rough year and faces strong headwinds moving forward. Based on my role, turnover in other departments, and cost of replacing those who have left from the same "level" in other departments, now is absolutely the time for me to negotiate a significant raise. But, we had a horrible year financially and next year is already looking rough too so it's unlikely I'll get what I think is reasonable. From a purely financial perspective, probably time to look at other options but not sure I'm ready make a leap and the risk that comes with it.
December 21st, 2021 at 5:52 PM ^
Statistics show a larger % of Baby Boomers retired and a ridiculous % of young adults under 30 returned home to live with their parents (I’m not looking it up for the actual %s, sorry MGo). IMHO the work ethic is very low with the younger generations, fewer young adults than prior generations really want want to WORK for their money, they want everything given to them, or making money via social media, gaming, etc... They believe they’re above entry level jobs, and don’t want to try to prove themselves to work their way up. So a combination of the oldest generation and youngest generation(s) are hurting the job market.
December 21st, 2021 at 6:39 PM ^
Agree with your conclusion, disagree with how you described coming to it.
When the Baby Boomers entered the workforce at 16+ they could do it with a high school education, if that. They got paid to train, got a decent salary that allowed them to work 40 hours a week, and that allowed them to get a car, a house, 3 square meals a day, insurance, and buy some toys and set up their retirement fund, while the spouse stayed home. They worked hard because they knew if they went to unemployment they'd be screwed. The boss gave bonuses at Christmas, and the trickle down economy worked.
Come to this new generation, for the same job they need a university degree, unpaid training, a salary that hasn't changed since the baby boomers got it even though cost of living has tripled or quadrupled and they are told to work 40+ hours a week, weekends, holidays, no paid overtime. This job allows them to barely pay rent in a tiny apartment, get a bus pass, eat ramen noodles 3 meals a day, hope they don't get sick or injured, and laugh at the thought of a retirement fund when they still have nearly 50k in University debt to pay off. The boss gets millions in bonuses if the company is profitable, and to make it profitable they will lay you off at a moments notice.
People today are tired. They are tired working for pennies while their boss buys a second yacht. They are tired of living in debt just to get by, and tired of being told they have no work ethic and are lazy.
December 21st, 2021 at 10:00 PM ^
Fair point, we’re all tired of the workload. While I don’t work around the dynamic of “bonuses buy yachts” so that’s got nothing to do with my point of view. I make enough money to live my life style and do what I want to do, I started at an entry level position and continue to work my way up. Over the past 5 years I have hired 15-20 “kids” with degrees into the same exact role I started in and very few of them still work for our company because they don’t want to put in the hours to learn the business and operations, they just expect to be promoted within 6 months for showing up to work, if not they move on.
It is a work ethic issue, they can be fired if hearing it but it’s true for a larger % than previous generations. You don’t just step into a role with a bonus to be able to make a house down payment or buy a car, let alone a yacht, you have to earn that by proving your self and doing good work, but this generation doesn’t seem like they want to earn it, they feel entitled to it.
December 22nd, 2021 at 10:56 AM ^
I think a thing to keep in mind is the labor market was heading this way anyway, but Covid sped it all up and made a lot of things happen at once rather than staggered. We had a very strong economy before Covid hit, and worker wages are usually a lagging indicator of a strong economy. Wages have been terrible since the 2008 economic meltdown, but we were due to see the job market reversing in favor of workers as the economy improved and as more and more boomers retire. And if the economy stayed at the pace it was going pre-Covid, maintaining interest rates this low would have us at reasonably similar inflation levels.
But Covid did happen, a ton of people died, a ton of people close to retirement age went ahead and retired out of the workforce. The fed got understandably spooked about raising rates and turned on the money printer to keep the stock market afloat. Now a lot of workers, particularly ones under 35, are seeing their labor be in high demand for the first time in their working lives. A lot of people are already furious at their employers over how Covid was handled, so it's even easier to unionize or get a vote from the union to take action and strike over this or that.
Covid has been an accelerant for sure, but we'd be dealing with smaller versions of what's going on anyway.