The U.S. Doesn't Have a Labor Shortage. It Has an Incentive Shortage
reason.com
reason.com
This is John Stossel's favorite stunt, he has also walked around offering to hire unemployed people to do manual labor for $8/hr, and been surprised when he doesn't get takers.
Advocating for people who are qualified, and have experience doing higher-paid work to take entry-level jobs feels like a waste. It's pretty clear that these employers aren't willing to offer higher pay, or they would be able to fill their openings, just like white collar positions are filled in a reasonable time.
"We are always hiring" is quite a bad sign for an employer.
If you want more applicants and higher employee retention, pay them more. It's that simple.
But the article does exactly that? The title literally says "The U.S. Doesn't Have a Labor Shortage. It Has an Incentive Shortage", which definitively hints it's an economic problem rather than a moral problem. In the body that's expanded upon
>Had government offered me almost equal money not to work, I never would have applied. [...] Given the cost of commuting, etc., many people find they are better off financially not working.
In other words, why get a job that pays $15/hr when you can stay at home, play fortnite and "earn" $16/hr[1]? Seems like an entirely rational decision to me.
The article is actually seems to be complaining about the US having a desperation shortage, because the one incentive it doesn't talk about is employers offering higher wages.
And frankly, the whole point of unemployment is that you're not so desperate that you have to take the first job you find, even if it's a big step down.
Until you're making around $30k, you can either be in dire financial straits and not work 40 hours per week, or you can be in dire financial straits and work 40 hours per week. Who in their right mind would choose the second option?
There are undoubtedly some companies operating at very low margins, but by and large, there has been a dramatic increase in profit-taking by companies, without corresponding increases in wages.
0. https://tradingeconomics.com/united-states/corporate-profits
But good luck figuring out a way to reduce corporate profits. Consider that your graph is just the for profit companies and there’s lots of nonprofits and gov-run orgs already.
It’s a tough problem to try to have companies raise wages and reduce profits. Not sure of any legislative examples. Minimum wage laws tend to result in higher prices and fewer positions.
Companies have business models with existing margins and any changes are hard given capital markets and competition.
Look at what happened with insurance profits when the ACA introduced payout requirements. [0] Costs increased and so did profits. Profits weren’t decreased and bonuses weren’t decreased, insurers just raised costs to the level to support the profit and bonus levels. This did not reduce costs nor insurance profits, instead it increased costs. [1]
[0] https://www.healthcare.gov/health-care-law-protections/rate-... [1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5145008/
If you want to instead talk about unrealistic expectations baked into corporate earnings, then you'll get no disagreement from me!
But they aren’t going to. I know that because if they were, they would have done it already. You could force it up with this stimulus, but only big Corp would survive it.
In this case, that's not true. If your competition can pay people the median US income to stay home and do nothing and offer them a tax break on that free income, it's going to be difficult to convince them to come work 40hrs/week for you even if you offer them 10-50% more money.
The key is to look at the marginal increase in income. Unemployment (plus limited federal additional benefits) can pay out similarly to the median US income for doing zero work. Anyone looking at a job will subtract those zero-work payments from your salary offer and only consider the marginal rate. If someone can only go from $30K on unemployment benefits to $50K working for you, your job really only pays them $20K/year.
Anyone who is remotely employable will get a shitty job thrown at them and their unemployment benefits stopped. They literally say, "if you're offered a suitable job, then you must accept it." And what constitutes suitable, is pretty much any job, even if it pays less, is in a different field, and the commute is significantly longer.
Source: i've been on unemployment before.
> If someone can only go from $30K on unemployment benefits
People are not making $30k a year on unemployment. This is a total mischaracterization of what's happening. It varies by state, but in my state, benefits are 50% of your wage (plus a bonus for dependents) up to a maximum of ~$700+$300 (fed bonus).
The thing is, that maximum is only available to a person making around $72,000 a year with three or more qualified dependents, and only for 39 weeks, and only if nobody offers the person a job. And a person earning $72k is pretty much guaranteed to get a job offer.
Source: used my state's unemployment estimator.
The average, including the federal bonus, is currently around $32K/year equivalent.
You can get the statistics here: https://oui.doleta.gov/unemploy/claimssum.asp (Select US Total).
Comes to a little over $310/week average for recent months. Add $300 federal and you get $610/week, which is equivalent to $31.7K per year.
I'm not making up numbers. I'm just using the government-reported averages.
Your initial disbelief underscores why this conversation is so difficult: Most people don't realize that the current average unemployment payments have reached equivalence with US median incomes.
> and only for 39 weeks, and only if nobody offers the person a job.
The federal changes have extended the unemployment benefits well beyond the 39 week limit. Again, the current situation can't really be compared to traditional unemployment.
Also, being offered a job doesn't automatically end unemployment benefits because job offers aren't registered with the government. This only occurs if the UI beneficiary self-reports that they declined a suitable job, or if the company that offered them a job is suspicious and motivated enough to report the person to the unemployment office. The latter scenario would only occur if the employee admitted receiving unemployment and the hiring manager was motivated enough to seek revenge for declining the job offer. It can happen, but it's not like it's happening frequently.
> People on unemployment aren't dumb: they know unemployment going to end
Likewise, employers are not dumb. They know this extended unemployment is going to end and they're not interested in competing against it for the remaining few months that it will be active.
Yeah, this is where you're messing up and completely mischaracterizing the situation. You're looking at weekly benefits and multiplying it by 52. The thing is:
* In my state, benefits are capped to 26 weeks, with a temporary 13 week extension.
* it's very difficult to continue receiving benefits.
* Those enhanced federal benefits are ending in September. Sooner in some states.
* Past weeks 8 or so, you are forced to take a job or stop receiving benefits. The only way out of this is to disabled or elderly, where requirements to be able to life 20lbs will disqualify you from employment.
There are tons of places out there, mostly factories and the like, which offer jobs to anyone whose been on unemployment long enough. The only way to avoid being forced to take these jobs is to be unable to meet the (modest) physical requirements.
Again, I've been on unemployment before. I remember this headache pretty well. Even with help from family getting my ducks in a row, I was booted off it after a week. Only very specific types of people really benefit from unemployment.
Before COVID, you’re right. But during COVID (scheduled to end around Sep I think) GP is right.
Right now, in mine and most states, unemployment benefits started last April and continue through September and the annualized rate is pretty high.
The exact hourly rate varies state by state but is $300/week higher because of COVID, and extended benefit periods.
In my state unemployment caps out at $350/week if you would normally make $550. So, before COVID, if I made $550/week, I would get $350 in benefits. And if I made more I would still make $350.
So basically if I made $14/hour, approximately, employed and lost my job, I would only get about $9/hour.
With the COVID benefits I get $650/week or about $16/hour. And I don’t have to actively work. And the benefit period is longer than 26 weeks.
This is not conjecture, it’s facts and pretty easily visible.
So if I’m looking for work right now and getting $16/hour in unemployment (annualized to $32k) then it’s unlikely that I’ll ever take a job for $15. Or even $20, etc etc
When unemployment benefits drop, then the calculus changes.
There’s a game theory element where it may be better to stay on unemployment through September and then take a job vs taking a higher paying job now.
Okay, then take the US median income and divide by 52. Compare that against weekly benefits.
The conclusion is the same.
> * In my state, benefits are capped to 26 weeks, with a temporary 13 week extension.
Again, you can't compare traditional unemployment with the current situation. The federal benefits have extended this multiple times. Someone laid off in early 2020 could still be collecting benefits due to the multiple extensions.
> * Those enhanced federal benefits are ending in September. Sooner in some states.
Yes, at which point the argument becomes moot. The article is discussing why some states are choosing to end the benefits sooner.
> There are tons of places out there, mostly factories and the like, which offer jobs to anyone whose been on unemployment long enough. The only way to avoid being forced to take these jobs is to be unable to meet the (modest) physical requirements.
I don't know about your state, but most state unemployment systems rely on recipient self-reporting. There isn't a mechanism by which factories can simply offer random people jobs and then their benefits end unless they accept random factory jobs.
There are also specific exceptions for receiving job offers that are too far below previous salary, would be detrimental to career path, and so on. Programmers aren't being trapped into factory jobs via unemployment, for example.
> Even with help from family getting my ducks in a row, I was booted off it after a week.
You were booted off of unemployment after a week? That's an extreme outlier scenario. Perhaps your strange experience is skewing your perception?
The number of people receiving unemployment benefits right now is around 20 million. Clearly, people are not being booted off of unemployment after a week with any regularity.
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
Why would McDonald's raise wages to that amount? Why would anyone offer a job that earned the job creator less the 100,000? It seems like the most likely outcome would be that lower paying jobs would disappear not that they would suddenly start paying out more. Either that or the amount of productivity from those jobs would go above that 100,000 amount - which seems functionally the same as saying the jobs would disappear because if you're working at a restaurant generating that much revenue you're doing something far different then the summer job I had.
Also, increased labor costs necessarily means higher prices for goods. Which affects the poor more than the rich. Does it matter to the rich if a gallon of milk or gas goes up 2x? No, they won't even notice. But the poor sure will.
Fixed it for you.
Also, government PPP small business loans are a thing.
I'm sure slaveowners also complained when they suddenly were not able to whip people into working.
I'm not against safety nets in principle. Check my comment history, my last but one comment was a diatribe against Marxism. But even so if Banks can get bailed out, why not sick labourers?
The problem is not safety nets, it's incentive structures. That's why I like the idea of a negative income tax over basic income. The less you earn working the more you get in benefits, but as your income rises your benefits decrease. You are always better off working, and always better off earning more that way. If the incentive structure was better I think the opposition to benefits would melt away.
I suspect you'll find that to be less effective at encouraging people to find jobs for the simple reason that it incentivizes people to work the bare minimum, if at all; when the income sources are mutually exclusive, there's no incentive to work unless the pay exceeds some threshold.
Contrast with UBI, where the alternate income source is constant. Since UBI is by definition not conditional on whether or not someone is fully employed, that someone has no incentive to not work, whereas the compensation for voluntary work (i.e. wage/salary) remains. This ultimately means that - provided it's indeed a universal basic income - you no longer need minimum wage laws, since it's no longer the employer's job to ensure its employees have enough money to survive (and on the flip side, workers have a safety net while they find jobs that actually pay fairly - or else create their own jobs by founding startups).
That is:
> Your competition is a welfare cheque that's paying people to channel surf from a sofa.
Only if it's actually competition, which would be the case for a negative income tax, but wouldn't be the case for UBI.
UBI funds would be paid out of the federal budget, which would be funded by taxes.
Above a threshold, earners would receive UBI but their taxes would increase by more than their UBI. It would still be called "universal" but it would be erased (and then some) for anyone earning more than a relatively low amount.
Negative income tax basically skips the distribution and collection and gets straight to the point.
The money must come from somewhere.
This assumes the use of an income tax. That's currently the case now, but moving to a more economically-efficient tax (cough cough land value tax cough cough) would prevent that situation entirely.
They're not mutually exclusive. As I explained, with a negative income tax you are always better off earning more yourself. In fact you always keep most of every extra dollar you earn.
It's misleading to engage in this labor debate (support vs jobs, etc) without also including a discussion of poverty. Our system is constructed to keep a large group of workers just at poverty level where they have no real options but to take work offered on any terms.
The enhancement of unemployment benefits has revealed this normally hidden dynamic.
This is just as much about a semi-permanent class of exploited low wage workers as it is about lazy people preferring unemployment to work.
40 hours plus benefits at $10 an hour would be a pretty good deal but the benefits part is so expensive that the $10/hour is close to an after thought for the people doing the hiring.
So you get 10-15 an hour for 20 hours a week here. And the same deal there. And sometimes at a 3rd job because it's not really 20 hours, some weeks it's 10. And you've got a juggle all of this which is next to impossible.
Federal benefits currently add $300/week to this amount, which roughly doubles the payments. The recent tax changes make this effectively untaxed income for most.
Now obviously $2.5K to $3K per month (including federal +$300/week) isn't a luxurious income, but that number is at or slightly above the median income in the United States.
To understand the issue: If someone has a choice between working 40 hours per week plus commutes to earn the median income or working 0 hours per work with no commutes, it can be difficult to convince some people to get that job.
Even a job paying more than unemployment benefits can be unattractive. If someone can collect the equivalent of $40K/year tax-free from unemployment by doing 0 work and they're offered a job that pays $60K/year (taxable) for working 40hrs/week, they only stand to gain about $15-20K (after taxes) by taking the job and leaving unemployment.
That's the crux of the issue: Even if people may be able to earn more by returning to work, the marginal increase in their payments might not be enough to incentivize them to work 40 hours per week.
If you're making $100K/year and have a career path and a mortgage and car payments and bills, these small unemployment payments may sound too paltry to even consider. However, for young people living frugally, it can be tempting to earn the median US income for doing 0 work, having all the free time in the world. Candidly, this is exactly what some young people I know are doing. Although some of them were just caught trying to check in to unemployment benefits while on a roadtrip out of state. Apparently unemployment portals do GeoIP checks now in an attempt to catch things like this.
The thing about unemployment agencies is that their job is to find jobs for unemployed. And the longer a person is on unemployment, the less picky they are allowed to be as to which jobs they accept.
People don't just hang around doing nothing while on UI. They are applying and interviewing for jobs, and the state unemployment office has a job placement department which will place any abled body person pretty quickly.
Most unemployment offices rely on employee self-reporting about any job offers. There isn't a mechanism by which jobs are offered and declining them ends your benefits.
For example, Kroger's Pick Up obviously became very popular during the pandemic, and I was grateful for it. But they had a policy that you couldn't tip the workers putting groceries in your trunk. WTF?? Now Kroger is charging $5 per pickup order (only sometimes). So it's okay to pay the big company extra, but not okay to pay the person doing the work. Fuck them, I put a tip in the trunk and tell people to take it.
Most large businesses are just despicable, and the people at the top are by association, because they institute these "you're under my thumb" policies.
> Given the cost of commuting, etc., many people find they are better off financially not working.
If that’s the case, offer higher pay. If you can’t afford to do that, improve efficiency, raise prices, or go out of business.
Society has decided to give people without jobs sustenance pay. Now you have to compete with that.
This is capitalism 101.
Seems to me it's only fair, that maybe the gov't tip their hand towards the supply side lowering supply and raising demand thus driving up wages organically without even needing to consider minimum wage laws.
>
> Too bad.
I suggest that being forced by necessity to work at a job with no future that doesn't suit your interests or talents is a human career form of technical debt.
Supposedly in ancient Israel, every 50th year was a Jubilee year, in which all debts were cancelled.
How about we accelerate the schedule and every 10 years the government offers unemployment benefits comparable to now, without the need for the fig leaf of economic emergency, and give people a chance to reassess and cancel some of their career debt
I was suggesting that the government offer enhanced unemployment benefits one year out of ten.
For everyone? At the same time? How would society function when half the people decide to leave?
No one would leave their job if they thought it was a good fit for them and adequately paid.
Only the underutilized and underpaid would be tempted by the benefits of a jubilee unemployment year. We have a lot of those now, which is why the current deal is having such a big impact. If businesses adjusted their approaches to hiring, managing and compensating, we could optimistically expect there to be far fewer in the future.