Insights & Advice


A labor shortage solution

The hiring boom that was expected in April 2021 fizzled. Last Friday’s nonfarm payrolls report came in at 266,000 jobs gained compared to over a million expected. It was the biggest miss in decades.

Politicians and many corporations were quick to provide a ready scapegoat for that failure. They blamed it on the weekly payments of $300 in federal unemployment aid through September 2021, on top of the regular unemployment benefits paid out by the states. In short, the fault apparently lies with the Biden Administration’s stimulus package. If the president and the Democrats had not provided these overly generous benefits, more workers would be thrust back into the work force in order to eat and pay their bills. Hogwash!

Many of these complaints are coming from service providers in the restaurant and retail trade where the median wage is around $11/hour versus more than $20/hour in other occupations. Non-partisan economists can find no evidence to support these wild claims, but there are two factors that could explain the lack of available workers.

Fear of contracting the coronavirus is one reason. Many millions of Americans avoided hunting for jobs in April because they were afraid they might be infected with the coronavirus. In the restaurant and retail business sectors (where the accusations are loudest), there is a much higher risk that can occur. Disruptions in schooling and childcare also contributed to the anemic job hires, since 2 million or more women specifically were prevented from looking for work because of caring for children at home.

A third explanation involves economic theory. The economy has suffered, and continues to suffer, from a severe shock. As in all such shocks, growth and hiring are not likely to evolve smoothly, like clockwork. The economic data will be choppy, reflecting the fits and starts of an enormous economy coming back to some semblance of normalcy.

Surging consumer confidence has fueled demand as Americans want to buy, eat, travel, and shop. Many companies have been caught flat-footed by this sudden explosion in new business. They somehow expected that workers would magically appear just because they decide to reopen their business after months of lockdowns and hesitation and fear. But business owners have been spoiled by decades of cheap available labor, especially in the U.S. services sector, which now represents about 70% of the American workforce.

In times like these it is easy to fall back on all the old myths about the American workforce and their failings. I am hearing comments like “Why work when you can get more staying home?” or “stimulus and unemployment benefits are killing the workforce,” and of course the old tried and true, racially motivated “people just do not want to work.”

Let me put an end to this crap. The U.S. is the most overworked, developed nation in the world. Today, 70% of American children live in households where all adults are employed and 75% of those women are working full time. In the U.S. 85.8% of males and 66.5% of females work more than 40 hours a week. And women make 87 cents for every dollar a man makes. Productivity per American worker has increased 400% since 1950. All the net gains in April’s job growth went to men. Women, as a group, lost jobs.

My solution to the nation’s dilemma of finding more workers is not to reduce unemployment benefits. That would simply lock our antiquated attitude toward labor. It is obvious to me that American companies, especially in the service sectors, need to pay higher wages to attract the workers they need. If they cannot do that and still make a profit, they should not be in business at all.

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