Supply and Demand

Supply and Demand

Workers Have Power

 

Conventional wisdom has it that markets are balanced by supply of what people want and demand from others for those same things. That maxim applies to current employment opportunities. 

 

As pandemic restrictions on public gatherings are eased, many businesses are gearing up to put their wares back on the market. Nowhere is this more obvious than in restaurants and other places where wages are low yet demand for service is increasing rapidly. “We’re Hiring” signs are popping up everywhere.

 

Places where employees were laid off due to pandemic restrictions are looking to bring those employees back into service and are finding it hard to make that happen. Even with demand at a high level, many are finding it hard to find people willing to work for what they earned before the pandemic sent them home. 

 

Several trends are emerging. Some employers are griping that the current unemployment benefit levels are keeping people at home. Some republican controlled states are buying into this notion and moving to cut unemployment benefits or reduce the amounts paid. Current benefit levels finally approach basic cost of living levels and pay more than many pre-pandemic employment packages offered. I doubt that this is the main driver of the difficulty employers face finding people to fill open positions. After all, people are social beings and want to interact with others and not just sit at home in front of the TV.

 

Recent polling suggests there are other factors at play. One is childcare. Low wage jobs no longer cover the cost of childcare much less provide cost of living wages. People who do not have childcare for pre-school age kids cannot go to work if they cannot cover that cost plus bring home money for food, housing, and other necessities. One of the provisions of President Biden’s rescue plan is to beef up childcare subsidies making it possible for parents of preschoolers and even school age children to re-enter the workforce.

 

Workplace safety is another new complication employers face finding people for their open jobs. Many food and tavern jobs require servers to interact with those who are not wearing masks and may or may not be vaccinated against the coronavirus. People who have been hunkered down at home with their families, trying to stay safe from the pandemic, are understandably reluctant to go to work in places where they feel likely that they will be exposed to virus carriers. The lure of low pay and long hours are just not enough to bring them back. Employers who give incentives to vaccinated workers and discounts to masked customers may be able to overcome potential employee fears.

 

A third factor is the label, “essential worker.” Many employers seeking to reward the workers who stayed on the job during the pandemic bestowed that label on their workforce and many took it to heart. The belief that I am “essential” to my employer’s success brings with it a legitimate sense that I am worth more than I was before I earned the title. With that, it is only natural that I get paid more for my work than I received before, especially as demand for what I produce is going up. This is a natural wage increase driver.

 

Finally, many former low-wage employees are coming to realize that they no longer must take whatever is offered from an employer. People are starting to demand more than what they might have made before for the same work because they see increased competition in the marketplace for their labor. We see that pressure in the long-term care industry where care givers move from job to job, facility to facility, when hourly wages go up by a dollar or two.

 

Employers need to rethink their business model, especially when they rely on low wage workers to provide the services they sell. If the model was only workable if the cost of labor did not produce a living wage, it unlikely your business will survive in this market where wages are going up significantly past previous levels and hefty signing bonuses are becoming more common. 

 

It is just not as simple as unemployment benefits are too high. There is much more in play and employers are going to have to start providing safe working conditions, pay living wages and provide real benefits such as paid child-care if they hope to stay in business. 

 

It is supply and demand. Maybe a $15 an hour minimum wage is a foreseeable reality after all.