It’s Not a “Worker Shortage,” It’s a Wage Shortage

June 23, 2021

While overall economic growth has been recovering, employment in May 2021 was still 8.2 million jobs below what it was in February of 2020, and as many as 11 million jobs below what it would have been without the pandemic-induced recession, according to an analysis by the Economic Policy Institute. Although hiring is picking up in some sectors, there are still a remarkably high number of people being laid off, with new weekly unemployment claims in early May close to half a million — comparable to weekly claims during the Great Recession of 2008 and the two recessions of the early 1980s.

Unlike those historical periods, the federal government has been doing the right thing by extending and increasing unemployment benefits, strengthening the social safety net, and stimulating the economy with direct payments to individuals. The potential of a large-scale infrastructure bill offers hope for further stimulus. In order to attain a full recovery, it will be absolutely necessary to maintain and expand the benefits contained in the American Rescue Plan.

However, a number of features of the current recovery — somewhat higher inflation and the perception of a “worker shortage” — are being used by employers and many Republican politicians as arguments to roll back unemployment compensation and block further stimulus.

A significant driver of both inflation and chaos in the overall economy is the disruption of global supply chains due to the pandemic. As the pandemic shuttered large parts of the global economy last year, producers of components such as semiconductors shut down or diverted their output, and have been struggling to meet demand as economies recover. Extreme climate events such as droughts and the deep freeze across the U.S. South in February have also affected petrochemical and agricultural production.

As just one example of the irrationality of our global market system, autoworkers are being laid off as demand for cars is rising (and driving up prices), because the auto companies can’t get enough semiconductors.

The threat of inflation is real, though likely overstated (especially by those who wish to use the threat of inflation to argue against social spending). The Consumer Price Index has increased 4.2 percent over the last 12-month period — the first time since 2012 that inflation has been above three percent.

Price increases have been driven primarily by certain big-ticket items which had their prices slashed last year as consumer spending dried up, such as used cars and furniture. The spike in inflation experienced this spring is to some extent “catch up” for the very low inflation in the economy during the first wave of the pandemic, and the Federal Reserve Board seems to believe that higher inflation may continue through the remainder of 2021, but is unlikely to persist into 2022.

Moderate inflation, if driven by increased wages, could help to lessen inequality, provided wages at the bottom increase faster than inflation. There is some evidence that this is part of what is happening — wages in the leisure and hospitality industries (which are notoriously low) were up 17.6 percent when comparing the period from February through April to the three months prior.

However, wages are the one area in which many employers are clamoring for government intervention to keep prices down. Claims that “Americans no longer want to work,” driven largely by anecdotes of fast-food restaurants and other low-wage employers shutting down for lack of workers, are being used by Republican politicians to attack the supposedly “overly generous” unemployment benefits provided by the American Recovery Plan. Over 20 Republican-run states have announced plans to end payment of the $300 a week supplemental unemployment benefits. Four of those states (Alaska, Mississippi, Missouri, and Iowa) have moved ahead with those plans as of this writing.

The actual evidence demonstrates that the issue is not a lack of available jobs (the April job report found one job opening for every 1.1 unemployed workers), but rather the unwillingness of workers to return to work at low pay levels, continued concerns about COVID-19 exposure, and lack of child care. Indeed, employers who have raised wages significantly have generally been able to find workers. Klavon’s Ice Cream, in UE’s headquarters city of Pittsburgh, made national headlines when they raised their wages to $15 per hour — and were flooded with applicants.

Rather than being “overly generous,” the expanded unemployment benefits are doing exactly what unemployment insurance is supposed to do — provide a cushion so that workers laid off through no fault of their own are not forced to accept substandard employment, which would drive a “race to the bottom” of wages and conditions for the whole working class.

Ultimately, the “worker shortage” is evidence that more working people are refusing to work for poverty wages, in unsafe conditions, and without adequate social support for their families. This is a good thing, and the labor movement can only benefit if working people maintain that attitude towards how they are treated once they come back into the labor force.


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