Public confidence in institutions has waned in the wake of the pandemic. Is distrust the new economic pandemic facing the economy?
March 14, 2022
By: Bobby Casey, Managing Director GWP
The Great Resignation has shown very little signs of waning. I’ve heard different stories anecdotally about how hiring managers weren’t calling people back or people stopped applying because of the unemployment and stimulus checks. Both could be true to some degree depending on where you are, but the stimulus checks have stopped and the unemployment has run its course.
Businesses are reopening, and at the end of January 2022, the US hit 11.3 million vacant jobs. U6 unemployment is just slightly higher at the end of February 2022 (7.6%) than it was at the end of February 2020 (7.4%). But at the end of January 2022 it was 7.9%.
Here’s the kicker though: people are still quitting at roughly the same rate at 4.3 million according to an end of January 2022 report from the Bureau of Labor Statistics.
An amalgam of factors accounts for this.
The Power Struggle
Left leaning politicians insist the power dynamic between employer and employee can be remedied through the legislation of unionization and higher minimum wages.
Turns out that’s not really true. You don’t actually need someone to collectively bargain for you, nor do you need laws to change. What you need is a fed up workforce who’s willing to unceremoniously abandon their job.
People are tired of the mistreatment, low compensation, and nonexistent advancement opportunities, so they pit employers against one another to get them to wise up.
Consequently we are seeing some of the highest wages for historically low paying jobs to date!
Since December of 2020, nominal wages and salaries were up 4.5 percent, the fastest increase since 1983. These increases bring nominal wages and salaries to 1.2 percent above their pre-pandemic trend.
Sadly, inflation is outpacing that by practically four times.
Nonetheless, workers are looking for employers to make it worth their while to sign on. Is the employer flexible when it comes to working remotely? What about PTO? There’s more to compensation than just the wage these days.
And when they aren’t making employers compete for their labor, they are starting their own ventures. I find this personally edifying and fantastic, as an entrepreneur myself. It’s my go-to answer for everything: start something else! So I love seeing it.
Trust Issues
The entrepreneurial trend segues quite nicely into the issue of eroding trust.
According to the WSJ, people were driven into their own arms for work because their existing occupations lacked flexibility, they became anxious about covid exposure, conversely they were upset about vaccine and mask mandates, or simply disenchanted with pre-pandemic office life.
That same article reports:
The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic, Labor Department data show, to 9.44 million. That is the highest total since the financial-crisis year 2008, except for this summer. The total amounts to an increase of 6% in the self-employed, while the overall U.S. employment total remains nearly 3% lower than before the pandemic.
People are getting jerked around months after the “two weeks to flatten the curve” initiative, and realize at any moment their lives aren’t their own anymore. They get laid off, their shops will close, their employers were bow to mandates and impose them on their employees.
The new normal has the scales falling from the eyes of the common man, I think. They see the risks of working for someone else, and a bit of existentialism has likewise struck them as the push boulders up hills for other people’s ambitions.
Confidence in the Future
Not sure how many of you have Depression Era relatives. If you’re a GenXer, your grandparents likely lived through the depression. It took a long time for them to trust banks again. They would save everything, and store everything at home.
The frugality ethic was actually a great thing to come from that era, but the distrust and lack of confidence in banks was by far the better response.
How can I trust an employer that was so quick to betray me at the first sign of government encroachment? Fair question, right?
The cold truth is: you can lose your job, your way of life, your bodily autonomy at the drop of a hat and there are enough powerful people willing to do exactly that when it suits them.
How do I know you won’t do this again? (… said Charlie Brown to Lucy as she sets up the football again…)
It’s difficult to watch Canada’s response to the trucker convoy and not lose confidence in the establishment. Think of everyone who was affected by this: businesses, private donors, platforms, banks, and investors.
Distrust is the New Economic Pandemic
It’s not just workers who are shying away it’s investors who refuse to take a chance on a country whose Prime Minister is willing to freeze accounts for political expediency. I think Canadians walked right up to the line of a run on the banks. I saw a few articles about banks shutting down their locations and websites for a bit… but in the end, Justin Trudeau turned it around.
In fact, the oil industry suffers a similar distrust and lack of confidence. When that happens, fuel prices go through the roof, since fuel prices are based on futures.
I’m not asking for you to sympathize with oil companies, but fuel prices affect everyone. It’s fairly clear the issues in Eastern Europe aren’t the cause of this. Prices started climbing the moment Joe Biden was elected President of the US. The Eastern Europe conflict pushed it higher.
In his democratic debate with Bernie Sanders, he was fairly clear:
Number one, no more subsidies for the fossil fuel industry. No more drilling on federal land. No more drilling, including offshore. No ability for the oil industry to continue to drill. Period. Ends.
He then proceeded to make good on his word, by shutting down the Keystone Pipeline project and ending new leases for energy exploration by executive order.
The argument is that there are 9,000 existing leases so it’s the oil companies’ fault for not using them.
And that could be true, if the process wasn’t nearly a decade long in bureaucratic nonsense. Having a lease doesn’t mean you’re free and clear to just go for it. Having a lease means you can be there and it’s not trespassing. It takes years to get to a point of discovery and excavation.
You would be hard-pressed to sell me on the idea that oil companies don’t want to make money. That is just patently false. Of course they want to make money. They currently average about $0.06 to $0.08 per gallon in profits. A fraction of what state and federal governments make per gallon on taxes.
After taking a huge loss in 2020, they are quite eager to recuperate the losses.
Like any crime, you need motive, means, and opportunity. The oil companies have no motive to avoid pursuing more sources for fossil fuels… but they do have plenty of reasons to be hesitant.
The shutting down of the Keystone Pipeline was a brutal blow. Not because of what the pipeline itself would’ve done. It would’ve reduced travel time of crude from Canada to the US some. That’s not monumental unto itself.
What is monumental is every investor who put money into this venture having to liquidate all the equipment, tooling, and other goods and services they bought at a loss. Even if President Biden changed his mind at this point on the pipeline, all the resources that were made ready are now gone and sold off.
They can’t trust the current administration to follow through on agreements they make for energy exploration. So if they put in all the research and development investment, what’s to say Biden won’t pull the rug out from under them like he did with Keystone?
Meanwhile, the Enbridge Line 5 in Michigan faces a possible permanent closure. Governor Gretchen Whitmer has been pushing its closure for nearly a year, claiming it poses a toxic threat to her state. This line has been around since 1953 without incident. But, according to an article from the Heartland Institute, if she is successful in closing it, “the Midwest may face up to a combined $5.9 billion annual spike in gas and diesel costs”, and “over the next five years, the cost could exceed $23.7 billion in additional transportation costs across the region.
The article continues:
A previous CEA [Consumer Energy Alliance] report concluded other economic impacts of closing Line 5 on Michigan, Ohio, Indiana and Pennsylvania, including:
$20.8 billion loss in economic activity.
$8.3 billion reduction in combined Gross State Product.
$2.36 billion foregone labor earnings in salaries, wages and benefits.
33,755 lost jobs.
$265.7 million lower annual state tax revenues.
Again, in addition to the direct economic impact, the gesture has consequences on the confidence of oil producers.
Oil prices are based on futures. If the investors and industry itself is not confident, the prices go up. It’s that simple. Prices were much lower under Trump in large part because he was a “yuge” advocate for American oil being produced.
I won’t go as far as to say people are “Going Gault”… yet. But it’s become less of a work of fiction and more of a work of prophesy on the part of Ayn Rand.
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