There Is No Labor Shortage

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Our friends at the U.S. Chamber of Commerce occasionally publish reports arguing that the U.S. economy is being held back by a “labor shortage.” They just came out with one in February, in fact.

But there isn’t any labor shortage. The Chamber of Commerce does a lot of very good work as an advocate for U.S. businesses, but its views on labor tend to be distorted—for entirely understandable reasons—by self-interest. What we need isn’t more workers willing to take low-wage jobs—what we need is better wages for those jobs. 

As the Chamber’s own findings confirm, healthy industries offering high-paying jobs do not have much trouble getting workers off the sidelines and into the game. Whether measured by the “quit rate” (the share of workers leaving their jobs) or by the industry-specific unemployment rate, the issue of relatively intense labor scarcity is concentrated—this will not surprise you—in largely low-paying hospitality and retail jobs. There’s no urgent labor shortage on Wall Street, in Silicon Valley, in Hollywood, in Big Law, or in manufacturing. In the Chamber’s report, we read that the quit rate in hospitality (4.3 percent) is more than three times what it is in manufacturing (1.3 percent). The Chamber of Commerce’s analysis reflects these facts: “Workers in traditionally lower paying industries, including leisure and hospitality and retail, have been most likely to quit their jobs. Meanwhile, in more stable, higher paying industries, the number of employees quitting has been lower.” While the workforce participation rate has declined, there are still workers out there: The unemployment rate in hospitality (4.8 percent) is two-thirds more than it is in financial services (2.9 percent) and more than twice what it is in manufacturing (2.1 percent). That means there are many workers looking for jobs in those industries but not taking the jobs on offer.

Conclusion: Put that filthy lucre on the table and watch those supply curves slope upward like that’s what they were born to do, because they were.

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