More On: Economics
Employers have a ready-made answer in front of them if they want to fill their employment positions.
Men's hearts are a curious thing. Economics is a difficult subject. The Great Resignation, on the other hand, is the least mysterious event of the Covid period.
I know how to keep people happy at work: pay them more.
The econometric libertarians in their propeller beanies, the country-club Republicans in their blue blazers, the individuals who teach the world about "bootstraps," "self-reliance," and "rugged individualism" all seem to grasp how supply and demand function in every market except the labor market.
We go through this every year. When the price of gasoline rises, the would-be central planners on the Left (and, more often than not, the by-God populists on the Right) whine and moan about "price gouging" and "market manipulation," and then the economists arrive to deliver the bleak explanation: Costs rise during the summer travel season due to increased demand, when supply is disrupted by changes in consumer behavior or other unanticipated market events, when oil prices rise, and so on. Nobody is pulling the strings behind the scenes in the retail gasoline industry; in fact, most merchants make very little money selling gasoline, which has extremely 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.”
When salaries rise, politicians naturally rejoice — or at least the majority of them do. Some of them get a lesson from Chamber of Commerce types and companies who have to pay those higher salaries, and they start lecturing the rest of the world about the evilness of politicians and wonks who "never signed the front side of a paycheck." They normally don't complain about price fixing in the labor market, but they do worry about a labor shortage. "We won't be able to fill those positions," they claim. You can't for the price you're paying.
Have you tried... giving them a higher wage?
I'd be thrilled if a Rolls-Royce Cullinan cost around $40,000 and Chateau d'Yquem was four-for-ten at the Circle K. However, this isn't how the market works. I don't think there's any existential (or oenological) justification for a 1982 Bordeaux to cost three grand a bottle or for a pair of Rios of Mercedes boots to cost $500 a pair — heck, I'm not sure why a large Starbucks coffee costs so much. Raw fish costs $60 a pound at my local grocery. Why? I'm not sure. That's just the way the market works. It'll set you back what it'll set you back.
“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.
Are you unable to pay those wages? Mr. Boss Man, you've got some tough noogies on your hands. I'm afraid I won't be able to afford a private flight. A new Subaru is out of reach for many individuals. Things are priced as they are. If your firm does not operate with workers trading at market pricing, it is doomed to fail. That occurs.
Pay them a higher wage.
I'm not an economist, but I don't believe you need to understand the arithmetic behind the relative proportions of income that flow to labor and capital to understand what's going on. Some workers now have a little more — or a lot more — negotiating leverage than they did previously, thanks to a few key changes in the economy. The free market is to be praised. I have a strong suspicion that the person who mows my lawn makes six figures, and I can't help but notice that the owner of my local car wash drives a car that is more costly than most of his customers. Because employing quality staff has gotten more expensive, several of my neighborhood's restaurants and stores have hiked certain pricing, which is — let us all agree — fantastic.
It's a challenging job market out there right now. It's difficult to locate good support. As a result, pay them extra.