Why the pandemic workforce shortage is more of a myth than a reality


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The general manager of Domino Pizza complained that the company cannot hire enough drivers. Lyft and Uber claim to have a similar problem. A McDonald’s franchise in Florida, offered $ 50 to anyone wishing to come for an interview. And some fast food establishments have hanging panels in their windows saying, “Nobody wants to work anymore.”

The idea that the United States suffers from a labor shortage is quickly becoming conventional wisdom. But before you accept the idea, it’s worth taking a few minutes to think about it.

Once you do, you may realize that the labor shortage is more of a myth than a reality.

Let’s start with some basic economics. The United States is a capitalist country, and one of the beauties of capitalism is its mechanism for dealing with shortages. In a communist system, people have to queue when there is more demand than supply for an item. It is a real shortage. In a capitalist economy, however, there are a ready solution.

The company or person providing the item increases its price. This causes other vendors to see an opportunity for profit and enter the market, thereby increasing the supply. To take a hypothetical example, a shortage of chopsticks in a city will lead to higher prices, which in turn will cause more local bakeries to start making their own baguettes (and also cause some families to choose other forms of starch). Suddenly, the shortage of chopsticks is no longer.

Human labor is not the same as a chopstick, but the basic idea is similar: in a market economy, labor and chopsticks are commodities whose prices fluctuate.

When a business struggles to find enough labor, it can solve the problem by offering to pay a higher price for that work – also known as higher wages. More workers will then enter the labor market. Suddenly the labor shortage will no longer be.

One of the few ways to have a real labor shortage in a capitalist economy is for workers to demand wages so high that companies cannot stay afloat while paying those wages. But there is ample evidence to suggest that the US economy is not suffering from this problem.

If anything, wages today are historically low. They have been growing slowly for decades for all income groups other than the rich. As a percentage of gross domestic product, Compensation of workers is lower than at any time in the second half of the 20th century. The two main causes are the consolidation of companies and the reduction of unions, which together have given employers more power in the workplace and employees less power.

As telling as the wage data, the share of working-age Americans who are actually working declined over the past decades. The country now has the equivalent of a large group of bakeries that don’t make baguettes but would if it were more lucrative – a pool of potential workers, sitting on the fringes of the labor market.

Corporate profits, on the other hand, have been rising rapidly and now represent a larger share of GDP than in previous decades. As a result, most businesses can afford to respond to a growing economy by increasing wages and continuing to profit, even if it may not be the exceptionally generous profits they have enjoyed.

Indeed, some companies have responded to the alleged labor shortage by doing just that. Bank of America announced Tuesday that he would increase his minimum hourly wage to $ 25 and insist that contractors pay at least $ 15 an hour. Other companies that recently announced pay increases include convenience stores Amazon, Chipotle, Costco, McDonald’s, Walmart, JP Morgan Chase, and Sheetz.

Why the persistent complaints about a labor shortage, then?

They are not totally wrong. On the one hand, some Americans appear to have temporarily dropped out of the workforce because of Covid-19. Some highly skilled industries may also suffer from a real shortage of skilled workers, and some small businesses may not be able to absorb higher wages. Finally, there is a heated partisan debate over whether the increase in unemployment benefits during the pandemic caused workers to withdraw.

So far, a combination of these forces – coupled with a rebound in the economy – has created an impression of a labor shortage. But companies have an easy way to solve the problem: pay more.

The fact that so many people are complaining about the situation isn’t a sign that something is wrong with the US economy. It’s a sign that business leaders have become so used to a low-wage economy that many think anything else is unnatural.

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Richard Montañez was a janitor at Frito-Lay when he introduced the idea of ​​Flamin ‘Hot Cheetos to the executives. The Hot Puffs were a huge success, and Montañez rose through the corporate ranks to become a leader himself.

This is the kind of inspirational story made for a biopic – the one that actress Eva Longoria is set to lead. And yet, the details may not be entirely true, depending on a Los Angeles Times investigation.

Although Montañez has made valuable contributions to Frito-Lay, the company said he did not create Flamin ‘Hot Cheetos. Lynne Greenfeld, an employee of the Frito-Lay head office, did it. “That’s not to say we don’t celebrate Richard, but the facts don’t support the urban legend,” Frito-Lay said.

Montañez disputed Frito-Lay’s claims, with the support of another executive, and said his low employment status was the reason for the lack of documentation of his role. “I was not a supervisor, I was the least of the least,” Montañez told Variety. He retired from the company in 2019.

As for the film, Frito-Lay spoke to his producers about the story gaps in 2019. “I think the story is pretty true,” Lewis Colick, screenwriter for the project, recently said. “The heart, soul and spirit of the story are true. He’s a guy who should be the face of Flamin ‘Hot Cheetos. – Sanam Yar, a morning writer

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Thanks for spending part of your morning with The Times. See you tomorrow. – David

Andrew Ross Sorkin of PS The Times will host an event at 1:30 p.m. ET today with Dame Ellen MacArthur on how to reduce our carbon footprint. RSVP here.

You can see cover page printed of the day here.

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