Saturday, September 10, 2016

Pay More

Dr. Ed Yardeni, President and Chief Investment Strategist of Yardeni Research, Inc., provided a summation of the latest U.S. employment findings:
Plenty of jobs available. In August’s consumer confidence survey, the Conference Board found that the percentage of respondents who said that jobs are plentiful rose to 26.0%, the highest since August 2007. The percentage saying that jobs are hard to get was 23.4%, near recent cyclical lows, and consistent with the cyclical low in the unemployment rate.
Record job openings. It’s actually somewhat surprising that nearly a quarter of respondents still say that jobs are hard to get given that job openings are at a record high. Perhaps many workers simply lack the skills required by the available jobs.
Unfilled positions hard to fill. NFIB’s August survey also reported the following litany of complaints by small business owners about the labor market: “Fifty-three percent reported hiring or trying to hire (down 3 points), but 46 percent reported few or no qualified applicants for the positions they were trying to fill. Fourteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem. This issue ranks third out of nine major issues listed. Twenty-six percent of all owners reported job openings they could not fill in the current period, down 3 points from, the highest reading in this recovery.”
Business owners, especially in our hyper-politicized environment, have been claiming there aren't any skilled workers to be found.

One caveat from Yardeni's findings:
Why aren’t wages rising more rapidly? There are a few explanations for the slow pace of wage gains. One possibility is that high-wage Baby Boomers are retiring and more jobs are going to low-wage Millennials. Workers may be afraid to push for big raises, fearing that that would provide an even greater incentive to employers to replace them with automation, robotics, and artificial intelligence. Since the Trauma of 2008, corporate managements have been obsessed with keeping a lid on their costs and maintaining high profit margins.
Although Yardeni mentions the lack of wage growth, he really doesn't give that factor its proper due. Which is sad because its the crucial point in this discussion. If demand is high and supply is low, wages should rise. That's basic economics.

Owners can't have it both ways - claiming they have all these positions to fill, yet they can't find anyone, while also being unwilling to increase wages to attract workers. If they are such astute businessmen, they should understand basic economics.

As Barry Ritholtz wrote, Having Trouble Hiring? Try Paying More.

None of this means there is never some frictional or structural unemployment, where skilled workers for a certain industry are in short supply. But, again, this is solved by increasing wages.

For Further Reading:
Shortage of Skills or Abundance of Excuses?
Skills Shortage Sham
Training, Skills, & Other Fairy Tales
The Zombie Skills Gap Meme That Won't Die
Low Wages, Not Skills Mismatch
Wage 'growth' continues to go nowhere
Wage Growth Is Weak. Inflation-Adjusted Wage Growth Is Much Healthier

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