If employers want workers to fill their job openings, there’s a ready-made solution staring them in the face.
If employers want workers to fill their job openings, there’s a ready-made solution staring them in the face.
T he hearts of men are mysterious. Economics is hard. But the Great Resignation is the least-mysterious development of the Covid era.
I know the secret to keeping employees on the job: Pay them more.
The econometric libertarians in their propeller beanies, the country-club Republicans in their blue blazers, the people who lecture the world about “bootstraps” and “self-reliance” and “rugged individualism” — all of these people seem to understand how supply and demand work in every market except the labor market.
We go through this every year. If the price of gasoline spikes, the would-be central planners of the Left (and, often enough, the by-God populists of the Right) bitch and moan about “price gouging” and market manipulation and whatnot, and then along come the economists to offer the dismal explanation: Prices go up in the summer travel season because demand is high, prices go up when there are interruptions to supply or changes in consumer behavior or other unexpected developments in the market, if oil prices increase, etc. There isn’t anybody behind the scenes pulling the strings of the retail gasoline market; in fact, most retailers make very little money from selling gasoline, which has very low margins. They make their fortunes on Monster energy drinks, cigarettes, lottery tickets, and those weird composite sausage things that sit on greasy rollers for God knows how long.
We go through it when progressives complain about “affordable housing” in places such as California while simultaneously making it impossible to build affordable housing in places such as California. “Supply and demand!” conservatives say. “If you want housing to be cheap and plentiful, then you need to let supply catch up to demand.”
Politicians naturally cheer when wages go up — or most of them do, anyway. Some of them get an earful from the Chamber of Commerce types, from the employers who have to pay those higher wages, and they start to lecture the world about the wickedness of politicians and wonks who have “never signed the front side of a paycheck.” They don’t usually complain that there’s price-fixing in the labor market, but they do complain that we have a labor shortage. “We can’t fill those jobs,” they say. Well, not for what you’re paying, you can’t.
Have you tried . . . paying them more?
I’d love it if a Rolls-Royce Cullinan cost about $40,000 and if they were selling Chateau d’Yquem four-for-$10 down at the Circle K. But that’s not how the market works. I don’t think there’s any existential (or oenological) reason for a 1982 Bordeaux to cost three grand a bottle or for Rios of Mercedes boots to cost $500 a pair — hell, I don’t even know why a large coffee at Starbucks costs as much as it does. My local supermarket sells raw salmon that’s $60 a pound. Why? I have no idea. That’s just the market. It costs what it costs.
“Workers Quit Jobs at a Record Level in November,” the Wall Street Journal reports today. The people quitting the most frequently are in relatively low-wage jobs in pandemic-affected industries. Surprise. More from the Journal:
“Workers continued to switch jobs in light of the many opportunities the current labor market provides,” said Nick Bunker, an economist at Indeed. . . . U.S. job openings and workers’ willingness to leave positions have remained elevated with an imbalance between openings and available workers. In November, 6.9 million people were unemployed but say they want work, meaning there were roughly two workers for every three openings.
Can’t afford to pay those wages? Tough noogies, Mr. Boss Man. I can’t afford to fly private. A lot of people can’t afford a new Subaru. Things cost what they cost. If your business doesn’t work with labor trading at market prices, then your business doesn’t work. That happens.
Pay them more.
I’m not an economist, but I don’t think you have to get into the particular mathematics of the relative shares of income that accrue to labor and to capital to appreciate what is going on here. A few critical things have changed in the marketplace, and some workers now have a bit more — or a lot more — negotiating power than they did before. Hurray for the free market. I strongly suspect that the guy who cuts my grass earns in the six figures, and I can’t help but notice that the guy who owns my local car-wash operation drives a more-expensive car than most of his customers do. Some of my local restaurants and shops have raised some prices because hiring decent help has become more expensive, which is — let us all agree — terrific.
It is a tough labor market out there. Good help is hard to find. So, pay them more.