People want to blame everything from the pandemic to horrible wages and bosses for the worker shortages. Who is right?
While I don’t think things are necessarily complicated, I certainly don’t take such a reductionist view of what’s happening in the world.
I think elites want this false dichotomy of super simplistic or too complicated to whirl through society so that people accept their dumbed-down narratives while abstaining from questioning that which is deemed too sophisticated and complex for their uncertified understanding.
There’s a whole middle section between those two points where reality actually resides.
Take, for example, the “worker shortage”. I put that in quotes because much like the supply chain backlog, there are multiple factors feeding into it.
Early Retirement
Baby Boomers were born between 1946 and 1964, or between the ages of 75 and 57. There are about 70.68 million of them in the US, the, roughly 85% of them being between 57 and 70. They are coming due for retirement, and the way in which this pandemic played out was just the kick in the pants many needed to take the plunge:
In the third quarter of 2020, roughly 28.6 million Baby Boomers have left the job market and retired, according to the Pew Research Center.
Working Moms No More
This is a big one. Women left the workforce to take care of their children when schools and daycares closed down, but many won’t return. Depending on where they are, it might not be worth it to create a matrix of school and daycare around their kids, for a job that remains inflexible to the parental demands on them.
Daycare is expensive, schools are a lot more persnickety about vaccinations, tests, and masks, and she’d basically be working to accommodate all of that. So, they have opted out:
Sixty-nine percent of working mothers plan to remain out of work to care for their children, according to a survey by TopResume, a resume writing service. Of the mothers who left the workforce during COVID, 70% said they voluntarily left to accommodate their children and 30% said they were laid off.
Cashin’ Out
This obviously won’t account for a majority of workers, but it’s worth mentioning. There is a small contingent of people who actually decided to cash in their chips and get out of the rat race due to the gains they saw in their crypto portfolios!
This might just be a deferral of going back to work for many, but these folks became crypto rich and aren’t really in a hurry to get back to work.
4% of Americans shave quit their job over the last year due to “financial freedom earned by investing in cryptocurrency” and another 7% say they know somebody who has.
Mark Cuban went further in his observation:
[M]ost of these people quitting their jobs aren’t bitcoin millionaires. In fact, it’s just the opposite: most of those quitting their jobs are in “the lowest income brackets”. In other words, they will be back to work some day.
Maybe it just bought them some time or reprieve? Either way, they aren’t in nearly the same rush as employers to “get back to normal”, whatever that means.
Related to this is those who received added benefits like boosted unemployment and stimulus checks. If they turned around and invested in crypto, they might have the kinds of gains needed to buffer their return to the workforce.
That would of course depend on the circumstances, of course. Some were most certainly just living check to check, while others might’ve been living with their parents and not had the same obligations. Either way, a large chunk of benefits expired on or around Labor Day 2021, which means the state paying people not to work is becoming less of a reason for the lack of workers.
Here’s the really weird thing: the unemployment numbers.
The current U6 unemployment numbers for October 2021 is 7.7%, which is where it was in January 2020. The U3 numbers are 4.6% in October 2021 and 3.5% in January 2020.
Unemployment is relatively the same in both. U3 unemployment only accounts for people who are unemployed and still looking. U6 includes a lot of other factors:
This rate accounts for anyone who has been seeking employment within the previous 12 months but have been unable to secure a job and has not searched for work in the past four weeks. It also includes anyone who has gone back to school, become disabled, and people who are underemployed or working part-time hours.
The numbers tell a confusing story. How is it that unemployment is back to similar levels as January prior to the lock-downs, while many of the small businesses are closed for good, but employers are struggling to find employees? How exactly did the US come out on the other side of the pandemic with more jobs, but less businesses?
Because where a door closes, a window opens. A lot of people were laid off with time and a few benefits coming in. And that lead to an interesting boom:
Americans filed paperwork to start 4.3 million businesses last year, according to data from the Census Bureau, a 24 percent increase from the year before and by far the most in the decade and a half that the government has kept track. Applications are on a pace to be even higher this year.
The surge is a striking and unexpected turnaround after a 40-year decline in U.S. entrepreneurship. In 1980, 12 percent of employers were new businesses; by 2018, the most recent year for which data is available, that share had fallen to 8 percent.
A Secular Shift?
One explanation, and one that I am keeping an open mind toward, is this “post pandemic shift” toward leisure over consumption.
As far back as 2017, we were pointing out the general shifts in attitudes favoring experiences over material things. While GDP overall took a hit, airline, hotel, and restaurant industries were seeing hikes. People were spending more on restaurants than groceries.
But what we are seeing in the labor market isn’t much different from what happened after other major pandemics, such as the Black Plague!
[A]ccording to Deutsche Bank, for most of human history people maximized leisure rather than income and consumption. Rising wages tended to coincide with people working less, not more. To wit, the most extreme example occurred in the aftermath of the Black Death, when real wages rose rapidly on account of a deep labor shortage.
This was a major – if logical – factor in driving real wages higher, as well as in driving real rates lower. Indeed this has been the typical pattern following pandemics in the last millennium.
Again, this could just be temporary because folks have a little savings and they could be biding their time. But like every trend during the pandemic, some of it stuck. E-commerce won’t be going back to pre-pandemic levels, for example. Commuting won’t be going back to the way it was before. Brick and mortar sales won’t go back to the way they were before. Media streaming won’t drop back to where it was in January 2020. These trends are sticky.
Whether people want to blame horrible bosses, poor work conditions, low pay, or insufferable customers, in the end it comes down to supply and demand. If you are among those looking for something other than the typical 9-to-5, good for you! I hope you start a business or a few side hustles and stay out!
If the pandemic gave a few folks some time to really reevaluate their situations for the better, then this is just the revolution I was hoping for!
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