Tight Labor Market is Here to Stay

If you’re clinging to the notion that enhanced unemployment is the reason you can’t hire help, let me be the first to say you will find yourself short-staffed – if not closed – come this time next year. Here’s why….

A LOT of People Died; They’re Not Being Replaced

Covid has cost us more than 600,000 lives, and it’s not over yet. The ripple that those deaths have caused throughout our country and culture hasn’t even been examined never mind calculated. The loss of a parent has enormous repercussions on a family – not just for a few months, but for years. Worse, we’re all getting old. Our crap diets, epidemic of obesity, Type 2 diabetes, and a variety of other “behavioral” and “non-compliant” health issues will contribute to the rapid exit of many from the labor market.

Declining birth rates, along with a declining sperm count, has been a back-burner socio-economic issue for decades. China’s lifted the one child rule. There’s a huge shortage of women in both China and India, and some countries are now encouraging motherhood via subsidies and other programs.

I’m not sure this will make much of a difference in the birthrate, though. Seems that regardless of incentive, wealth or opportunity, women choose to have fewer or no children, and that trend will likely continue. Maybe motherhood isn’t the greatest job a woman can have.

Wealth Transfer

You think millennials are spoiled and entitled now? Wait until they inherit a ton of money….

We are on the cusp of the greatest generational transfer of wealth in our nation’s history. As Baby Boomers die, they are transferring their wealth — not necessarily to their children — but often to their grandchildren. According to the WSJ, the average inheritance is a little over $200K. That is a life-changing amount.

Money gives you freedom. Money gives you options. Money gives you the ability to take risks. Money makes it whole lot easier to tell people to fuck-off.

Business owners take heed: If you’re difficult to work for and/or your business depends on a never-ending supply of people who are poor, desperate, or have few economic options, you may need to reconsider your business model.

Retirement

The tail end of the Baby-Boom generation (those born in the late 1950s early 1960s depending on who’s talkin’), is nearing retirement age, which can range from 62-72, or earlier, depending on how much money you want to pull from Social Security and your other accounts.

It’s estimated that Covid “forced” about 2 million people into retirement. Some could be enticed back into the job market, but most of these are permanent life changes – they will never return to the labor market.

Money managers are quick to point out that people can’t “afford” to retire, and you are likely to outlive your money, but that’s mostly their commissions’ talkin’. You’d be surprised how little you need to live on when you only have two old people to feed, and all your stuff is paid for.

Nevertheless, depending on the nature of the work and people’s health, some of boomers, of course, will continue to work. However, those are more likely to be at the very top-end or very bottom-end of the income spectrum. The rest of us will sell our homes, move to someplace cheaper, and be done with working for “the man” every night and day.

Small City Employers are at a Disadvantage

Gone are the days that a company in Des Moines or Charlotte or Salt Lake could pay less than a company in San Francisco or New York. If your profession is in demand, and you can work virtually, no longer does your compensation and career path need to be stifled because you want to live in a smaller city.

This is the start of a golden age for labor. Companies that pay more and support virtual workers will suck talent out of smaller markets – to the detriment of those companies headquarter or office-ed there.

Regional pay scales are on the shelf next to the fax machine. No one cares where your office is. If you want IT talent, other highly skilled, gold-collar workers, you’re going to need to level-up your compensation, or you are not going to be able to compete. And, if you can’t compete? You’re not going to be in business.

The Commute? That’s Comin’ Outta YOUR End!

Jamie Dimon, a champion of capitalism (until he’s short on cash, then he’s first in line at The Fed), has “demanded’ JPMorgan/Chase workers return to on-site work and Jamie’s “culture,” adding that if people didn’t like the commute, that’s “too bad.”

Maybe Jamie isn’t good at math? Let’s say you have a 45-minute drive to work, and are on-site five days a week (eight hours working, one hour unpaid lunch), that’s 52.5 hours a week “dedicated” to work – minimum. Men, add in an additional hour of “prep” time; women 1.5 hours of prep each day and now you’re up to 78.75. In other words, almost double the amount of time compared to the hours you are paid for….!!

So, if you’re making $35/hr your real hourly is closer to $17/hr – before taxes and before other expenses and lost opportunity costs, like your side hustle or education. That’s why the poor stay poor. And, that’s also why I’m not going to drive to your office, or commute to a restaurant, or hire a sitter (if I could find one). I think I’ll just stay home, cook from scratch, take on-line classes, and look for job where I contribute 40 hours and get paid for 40 hours. That’s just a smart business decision. It doesn’t make me an entitled ass-hole who doesn’t want to work.

It’s not about the commute — it’s about being paid for all my time. I’m contributing time (which, I believe, is the same as money), to enhance Jamie’s “culture” – whatever metric that is. However, all that good culture money is coming out of my end, not Jamie’s. He’s all up for the “free” culture, but I’ve yet to hear him say that his culture is important enough that he’s going to part-with-some-cash for it.

I believe in karma (and capitalism), so I feel confident Jamie and his other banking buddies will receive a big message about onsite work (probably when one of their cloud APIs goes down in a smoldering heap of technical debt). At that moment, they will see that labor isn’t as forgiving as The Fed. I think Jamie will also learn that he’s not a home-town hero, a lot of employers are more than willing to hire talent from Ohio.

Finally….

Here’s a universal truth: When you’re rich, life doesn’t change very quickly or very radically. For the affluent, things roll-along, even in the worst of times. Because many wealthy capitalists haven’t personally “felt” the change Covid has brought to the labor market, they don’t think that it’s real. They don’t understand this “entitlement” of labor, or that the world is fundamentally different now, and why we just can’t order people to “go back” to our good-old pre-Covid cubical culture.

Even before Covid, the rise of gold-collar, knowledge workers was beginning to reverse the employer advantage in competitive labor markets like tech and healthcare. Crisis, as a cultural accelerant, has firmly flipped the advantage to labor – and economists predict it’s going to stay that way for a l-o-n-g time….

Labor has had decades of opportunity and advice on how to be a good employee. That cannot be said of employers. Most employers are spoiled, entitled, and have a long history of a “Doritos” style of talent management (“They’re just people, we’ll get more…”). And because so many employers historically have shown zero interest in being a good employer, now they can’t seem to hire anybody.

The tight labor market isn’t about lazy millennials or enhanced unemployment benefits. Things have changed, even if they haven’t changed for you personally. Employers need to accept reality, and level-up their hiring game or they’re going to be out maneuvered by those who will.

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If you enjoyed this article, check out some of my other posts and podcasts on employment, interviewing, and the contingent job market.

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Copyright 2021 Pierce/Wharton Research, LLC. All rights reserved. No part of this post shall be reproduced without permission.

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