Shortage of labor by rejecting wage offers
This posts refers to an article written by Gary Burtless, Unemployment and the “Skills Mismatch” Story: Overblown and Unpersuasive.
Mr. Burtless says that businesses are complaining about a skills shortage in an environment of lots of job openings. What kind of model might describe this situation? I have one… (link to model)
Labor share represents the strength of real wages to entice workers. The employment rate represents the percentage of workers that will be employed at that labor share. If labor share/real wages fall, less workers are willing to supply their efforts at that wage level. Yet firms will demand more workers… or better said, firms will expect workers to be just as likely to accept lower wages.
Now Mr. Burtless sees this situation and suggests to firms…
“It is cheap for employers to claim qualified workers are in short supply. It is a bit more expensive for them to do something to boost supply. Unless managers have forgotten everything they learned in Econ 101, they should recognize that one way to fill a vacancy is to offer qualified job seekers a compelling reason to take the job. Higher pay, better benefits, and more accommodating work hours are usually good reasons for job applicants to prefer one employment offer over another. When employers are unwilling to offer better compensation to fill their skill needs, it is reasonable to ask how urgently those skills are really needed.”
I agree with Mr. Burtless. Employers expect there to be enough workers who will take whatever wage is offered them. The solution is to offer better wages and benefits. And the aggregate data is showing that firms are not raising wages much.
One piece of news that may bode well is that higher wages and higher benefits are being reported today (wages up 0.6% in Q2 and non-Wage benefits up 1.0%)
Jobless claims higher, but still at a low level
I offered this comment the other day to this: The effect of the minimum wage on youth employment – Stephen Gordon
I don’t know about day-to-day conditions in Canada of course. But bear in mind that a higher minimum wage attracts higher value employees — a.k.a., older employees?
Sort of the reverse of the effect of deunionizing certain jobs in the US — like supermarket — where the value of the new (two-tiered) employees seems lower.
In Chicago, amazingly, 100,000 out of my guess 200,000 minority, gang age males are in street gangs mostly (I presume) because among other things the US minimum wage is now $3.50 an hour below the 1968 level while per capita income has nearly doubled — by our standards our minimum wage pays like a Bangladesh shoe factory. And incredible state I call it the “Great Wage Depression.”
IT IS POSSIBLE TO PAY AMERICANS A LOT MORE BOTH BECAUSE THERE IS A PROVEN, MODERN WAY TO RESHAPE THE LABOR MARKET — LEGALLY MANDATED, CENTRALIZED BARGAINING:
Look at Wal-Mart: 7% labor costs. DOUBLE Wal-Mart’s average wages ($10 to $20 an hour) and ADD health benefits, paid vacations, etc., and prices might go up 10% (7% + 3%?). If Jimmy Hoffa’s Teamsters were in there that would have occasioned long ago.
I have been touting that centralized bargaining was started in continental Europe by industrialists seeking to avoid a labor race-to-the-top after WWII in order to direct more money for rebuilding. On further reading, it seems centralized bargaining was indeed started first by the Teamsters Union in Detroit in the thirties — Hoffa having been the follow up leader to push it. (Yea, Teamsters!) It is the only labor market setup that can cure all your economic and political ills — so when are we going to hear some talk about it around here?
AND BECAUSE WHAT THE CONSUMER IS WILLING TO PAY LABOR HAS FALLEN SO UNBELIEVABLY FAR BEHIND:
We do not know how far below most people’s “maximum buy line” burger prices have sunk during decades of down-drifting minimum wages — plausibly meaning today’s prices could rise 25% higher and people might buy just as many; 50% might cut into business. We DO know today’s minimum wage is $3.50 an hour below what it was in 1968 — we DO know per capita income has near doubled over the same time frame. It is perfectly plausible that fast food prices began dropping deeper and deeper below the “maximum buy line” decades ago!
PARDON THE SHOUTING, BUT:
Look at most of the Americans you meet working on less than specific training required jobs (like x-ray tech): they are embarrassed. They are earning $400-$500 a week. $500 is today’s median wage.
Look at the official federal poverty line: 3 X the price of an emergency diet (dried beans only please; no expensive canned) — a formula from the mid-fifties = $20,000 poverty line for family of three ($400 a week). Realistic minimum needs line based on table 3-2, p. 44 (after adjusting for inflation) in the MS Foundation book Raise the Floor works out to more like $50,000 a year for family of three if it has to pay its own medical insurance ($1,000 a week!). HALF OF AMERICANS NOW WORK FOR HALF THAT POVERTY LINE WAGE OR LESS!
We’re looking for people right now, and I suspect we may not be offering all that much. Local market conditions are such that it may not be necessary, we seem to have a surplus of qualified applicants because Raytheon has rolling layoffs right now and they’re 10 minutes down the road. Meanwhile, we have still got a lot of positions open. We lost about eight people in the last several months, and we have been very slow to fill them, in part because we had a hiring freeze in Q2. Every company is going to be in a different situation.
People will often work at the easiest job they can get at a given pay level. That’s why you don’t see Americans working in the fields.
First, a quick note to Critter: you’re saying that American youth (and presumably seniors, too) should take up the backbreaking, dead end jobs that are only filled by migrants because the migrant’s economic situation is desperate? Do you really want a generation of desperately poor, disabled Americans with no net worth? There’s a name for those people — or there was, before the Civil War.
I guess the real decision America faces is what America is. Is it a nation of people working to make a long term home and society for themselves and their great-grandchildren? Or is it a feedlot of captive workers, used or discarded as suits the needs of a small minority? For forty years, the first definition has been under attack by a swarm of policies and legal changes, while shills still proclaim it to be the real America.
A quick response to Mausa. I don’t know how you got that out of what I said, but you have it completely backwards. What I am saying is that Americans don’t chose those backbreaking jobs because they can get other jobs that are not backbreaking for the same pay. People take backbreaking jobs at low pay because they don’t have other choices.
No, not “ah”.
I love the thought process that in the job market of the last five years people have the option of choosing over a surplus of openings.