Why a Labor Shortage Just Might be a Good Thing

 

How many times have you seen the makeshift sign taped to the glass door of a store or restaurant, each sign telling the same story:

We are short staffed. We ask your patience. We’re doing our best.

Then comes the real message: Please refrain from rude or violent behavior. Make lattes, not war.

The very existence of such signs is testament to recent bad experience. In big cities and small towns alike, we’re finding that customer rudeness is inversely proportional to the staffing level of the establishment. The fewer the people who serve us, the more likely we are to become obstreperous with those who do.

We’ll probably have to get used to this. Apparently, labor shortages are the new normal, an economic fact of life. In the U.S., there are now roughly ten million unfilled jobs, but only six million people looking to fill them. And while that may mean we spend more time in line at Dunkin’ Donuts, it also means a lot of people now have real leverage in the workplace — for a change.

The four-million-worker shortfall means there’s a lot of work not getting done,  and a lot of money not getting made. Much of this is down to all the people who don’t want the jobs that are on offer. The pandemic forcibly ejected millions of people from low-paying jobs at go-nowhere, zero-benefit hellholes, and a huge percentage of them are not going back. They’ll need to be coaxed back.

This is putting pressure on employers, who’ll have to decide what sort of workforce they want to pay for. Do they want to go cheap — the Amazon model — and get people who are perennially overworked, resentful, and looking for a chance to quit? Or would they rather pay a premium — the UPS model — for people who value their jobs, who want skin in the game, who are willing participants in the future of the company?

Labor shortages are supposed to take care of themselves. Econ 101 teaches us that the “invisible hand” of the marketplace is supposed to keep supply in line with demand. So when the demand for work exceeds the supply of workers, wages are supposed to go up, and they’re supposed to keep going up until an “equilibrium” is reached — that happy place where employers enjoy an adequate supply of workers, and workers enjoy an adequate living.

This is basic capitalism, yet it’s amazing — and depressing — how seldom this win-win between labor and management actually happens. When it comes to labor, the law of supply and demand goes largely unenforced.

That’s deliberate. And it’s been that way for three decades, ever since Reagan. Since then, too many thumbs have been put on too many scales, and it’s been workers who have paid the price.

But now, for the first time in a generation, labor is flexing its muscles. Unions are trying to claw back what they’ve given up over decades of systematic sabotage, mostly by Republican administrations.

The employees of Ford, GM, and Stellantis are still smarting from having to help their companies limp through the Recession of 2009, when the entire American auto industry was on the brink of bankruptcy. Their union, the United Auto Workers (UAW), had to agree to draconian cuts in wages and benefits, even as they were forced to swallow a two-tier wage structure in which new hires worked for half the pay and fewer benefits than their more privileged co-workers.

So now that these same companies are booming, you’d think they would reciprocate. You’d think they would hand back to their workforce at least some of what they took away.

But no, as usual, it’s up to the union to take it back, rudely if necessary. Which is what their strike is largely about. It’s not clear how that strike will ultimately play out, but the UAW is driving a very hard bargain, and it has already pried major concessions from both Ford and GM. Stellantis is expected to follow.

This comes right on the heels of the UPS strike that never happened. The company caved on most of the Teamsters’ major demands, before a single worker walked off the job. Which gives you some idea of the stakes. And the leverage.

In the current economic climate, companies had better expect to pay more for labor. If they’re not planning for it — if they’re not working on ways to roll with it — those same market forces they’re so fond of will eat them alive.

Of course, even when employers are willing to raise wages — and plenty of them are — they’re still not finding enough willing workers. A four-million-job shortfall can’t be made up overnight. It might not even be possible to make it up at all, not without a serious change in the nation’s attitude towards immigration.

But immigration reform is a non-starter among the people who would most benefit from it: large corporations and the Republicans who enable them. But rather than promoting sensible immigration, they’ve reduced the entire issue to racist tropes, with Fox pumping out endless comic-book images of poor, dirty migrants waiting at the southern border to rape our children.

They continue to ride this manufactured issue, even though it gets no traction outside their bubble, and even though they shoot themselves in the foot by doing so. In pandering to the ignorant xenophobia of people who, in all likelihood, have never even met an immigrant, they’ve closed off their own businesses from much-needed labor. They’ve deprived themselves of a rich vein of quality workers that could easily be tapped, were idiocy not such a priority. They’ve created, in other words, their own labor shortage.

So immigration won’t solve our labor problems, at least not in the near term. One day the policies could loosen up and equilibrium could, in theory, be achieved. But for now, the constricted supply of labor is forcing real changes in the labor-management dynamic. Which is why we’re seeing the first throes of unionization in entire industries — retail, hospitality, healthcare — that have long resisted it.

Today’s workers are not interchangeable cogs. You can’t pop one out and order an identical one from Amazon. There’s too much training involved, too much investment, too much human capital. Smart companies understand that it’s much easier — and much cheaper — to retain the people they already have.

Which means more carrots and fewer sticks. Which means real incentives, not just in benefits and work environment, but also in the intangibles — like, say, loyalty, which needs to be felt equally by both labor and management.

Even in a job market less competitive than our current one, a happy workforce is good for business.

But if the history of organized labor tells us anything, it’s that employers periodically need reminding of this basic truth, often with a smack upside the head.

Perhaps we’ve arrived at that moment.