Wall Street Times

An end to pay shortage will fix labor shortage

Image Source: Politico

There is no shortage of workers. But there need to be more jobs that pay well enough to make people want to apply.

So many times over the years, it has been shown that when a public problem is misrepresented, the proposed solutions are either useless or mean.

One current example is the so-called “labor shortage” in the United States.

Jerome Powell, in charge of the Federal Reserve, says that the United States has a “structural labor shortage” that isn’t likely to be fixed soon. The United States Chamber of Commerce says that employers in the U.S. can only fill up to 10 million job openings because they can’t find enough workers.

In reality, there is enough work to go around.

People need more jobs that pay well enough for them to want to apply.

(There’s also the fact that the large baby boomer generation is getting old enough to retire. But after the pandemic, many retired people returned to work because they didn’t have enough money saved or were worried about the stock market. So if jobs paid more, more boomers might move back.)

After accounting for inflation, the real wages of most Americans keep going down. According to today’s inflation report, wages have gone up about 5% in the last year, while prices have gone up about 6.5%. This means that at least 1.5 percentage points have been taken away from most workers.

Costs for child care, care for the elderly, and transportation (cars, used cars, and gas), all of which are big expenses for many working people, have gone up.

The federal minimum wage keeps going down in the meantime. It hasn’t gone up in thirteen years, which is the longest time ever that it hasn’t. So when you factor in inflation, its real value is at its lowest level in 66 years.

Even if you don’t know much about money, you can understand why some workers might say, “To hell with it.”

Does labor shortage exist?

After the financial crisis in 2008-2009, economists warned of a “labor shortage.” But there was no longer a “labor shortage” after the economy got better and wages went up.

So, what should be done about employers needing help finding people to work for them? Simple. Businesses should pay their employees more if they want more people to work for them.

Jerome Powell and his coworker want to avoid hearing this. Instead, they want to fix the “labor shortage” by slowing the economy so employers can find all the workers they need without raising wages.

Even though the news about inflation today is good, central bankers still think they need to slow down the job market and stop wage increases. Fed Chair Jerome H. Powell said at his last news conference in December, “Labor is by far the biggest cost in the service sector.” ” Also, the job market is strong, and wages are very high.”

But if we slow the economy down, millions of people won’t get raises, and millions more will lose their jobs. This is especially true for women, people of color, and low-wage workers.

Some corporate economists and Republicans say that the “labor shortage” is caused by too many people getting unemployment benefits. They say that the best way to get more people to work is to make life harder for them when they’re not working.

Casey Mulligan and E.J. Antoni’s recent “research,” says that “it pays not to work in Biden’s America” because unemployment and Affordable Care Act benefits are so good that “many businesses can’t get workers back on the job almost three years after COVID-19 hit these shores.”

Baloney. Most people who are out of work are in a tough situation, with the exception of rich people who don’t work and their children.

The benefits of the pandemic are over, and America’s social safety nets are in the same bad shape as when the pandemic started. Before the pandemic, less than 30% of Americans who were out of work and could not find work were eligible for unemployment benefits. These benefits only last six months, shorter than in any other rich country.

Poor handling

Since then, we haven’t done anything to fix this broken system.

People with low incomes can pay for health insurance with the help of subsidies from the Affordable Care Act. Without these subsidies, many people wouldn’t be able to get the medical care they need, making them more likely to get sick and be unable to work.

It might be true if you follow the argument to its logical end. Take away all safety nets. People who don’t have jobs will eventually be in so much pain that they will have to take any job, no matter how much it pays or what it requires.

But if we do this, the economy will get even worse than it is now.

People don’t work because jobs don’t pay enough, wages are going down, and the costs of taking care of children, caring for the elderly, and getting around are rising.

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Both the Fed’s solution (slowing down the economy so employers can find the workers they need without raising wages) and the Republican corporate solution (cutting safety nets, so people are so desperate they have to take any job) are cruel. They would make life very hard for many of the weakest people in our society.

We must pay people more if we want to live in a good society and get more people to work.

Opinions expressed by The Wall Street Times contributors are their own.