8 Million Jobs Lost and 8 Million Jobs Available

Help wanted signs everywhere and a record 8.1 million jobs available. Where have all the good workers gone? For reasons that appear abstruse to economists, millions of prime aged adults are increasingly not returning to their jobs. Pundits opine that: wages are too low, that we need more  day care collectives for our Borg toddlers, or that Covid enhanced unemployment insurance pays to refuse actual jobs. Perhaps the addictive Call of Duty gaming and plethora of new streaming services are the culprits? 

US employment was 152.5 Million pre-pandemic and fell to just 130 million when economic lockdowns climaxed a year ago. Since then, the rapid recovery has brought back 14 million to the workforce. With over 8 million pre-Covid workers still “seeking”  jobs and another several million more needed to regain trendline labor growth, impatient politicians are pointing fingers at various impediments to full employment, but lacking cogent solutions.

Economists have always assumed that some level of unemployment is transitional and impossible to eliminate. For decades the 3.5 to 4% unemployment levels have been essentially full employment. If we reach this milestone of early 2020 again and bring roughly 4 million workers from welfare to work, then we are only solving half of our 8 million labor supply bogey. 

The unemployed of course are those that want work, but claim they can’t find it. Not in the labor force (NILF) 25 to 54 year old persons are those who can’t or choose not to work.  NILF men number 8 million, about 4 times the population adjusted quantity from back in the 1960’s for the same age demographic.  Surveys show that NILF men spend much of their idle time (~6 hours a day) playing video games and watching TV. At least Call of Duty’s Activision Blizzard and Netflix are hiring workers to keep the couch potatoes happy. Motivating capable men and women back to work would seem to be worth investigating to deal with our secular labor shortage.

 Why don’t these gamers get a job? Labor demand and financial compensation, even for low skill entry level positions, are the strongest in history. Higher wages are not the problem as hourly rates are soaring. The old partisan pandering of demanding a $15 per hour minimum wage is proving to be moot as many of our largest employers are paying above $15 along with signing bonuses. Recent examples of voluntary wage hikes above political proposals: Amazon just announced $17 wages and signing bonuses seeking 75,000 entry level workers. Bank of America just stated it will raise its entry level wage to $25 an hour. Average hourly wage equivalent for Uber and DoorDash drivers are almost $18 an hour (4 million workers) and in some populous locations over $30/hour. The hurdle of competing with the Federal Government enhanced Unemployment Benefits of between $13 and almost $28/hour (depending upon the State) not including other benefits, is certainly a valid impediment to hiring cited by most businesses and an indication of Government overreach. These enhanced benefits will soon disappear which will speed up the welfare to work conversion rates this year, but will not satisfy our 8 million+ worker deficit.

Social scientists lament that many potential workers fall victim to opioid and heroin drug addictions at great cost to society. In 2017 there were 19.7 million adults battling a substance use disorder, with more than 70,000 deaths. There is strong evidence that drug fatalities in 2020 will surpass previous records by a whopping 20 to 30% based upon state samplings. Despite major efforts to control drug prescriptions over the past 5 years, the crisis has worsened. Removing millions of potential workers from addiction and saving over 70,000 lives a year would reap multiple benefits to our society and economy, but the solutions remain elusive and it’s unlikely we will see a major reversal here that would address the labor force utilization rate materially. Over 98% of employers don’t mention drug testing in their job openings to maximize candidates.

Somewhat related to our drug abuse is our globally dominant crime culture. The US  incarceration rate is 100’s of % above any of our Western allies and thus another barrier to maximizing our potential workforce without any obvious answer. The US has more than triple the number of criminals than the whole of the European Union, despite their 37% larger population. If the US had crime rates and prisoners per capita similar to its allies we may have the potential for over a million additional workers that could at least make a dent in our beleaguered labor pool. However, there is no consensus on how to reduce Americas culture of crime and violence, thus tapping into this captive labor source is unlikely to provide any short to medium term boost to our economy. 

Our President is promoting the need for $400 billion in childcare and homecare funding as a highlight of his $2.3 trillion infrastructure package. It’s true that the pandemic led to a 144% increase in child care-related work absences in 2020 compared with the same period in 2019 and there are still 150,000 childcare workers that have yet to return. Aside from the hutzpah of labeling childcare as “infrastructure”, workers are returning on their own as vaccination rates rise and safety protocols are relaxed. Throwing money here and encouraging more pre-school may bring additional thousands more to work, but this will not solve much of the labor shortage today.

Disability laws are an interesting incentive for capable young workers without children to choose a quiescent life at home with their Netflix and Youtube. The 2008 Americans with Disabilities Act (ADA) greatly expanded upon the commonly recognized activities of impairment to include sleeping, concentrating and and many more that no longer require court determination. Additionally, any devices like hearing implants, inhalers or prosthetic limbs can be ignored to ensure financial disability supplements without seeking compatible employment. While working age men have increasingly been leaving the labor pool for decades, there was another exodus of men and women since the 2008 Disability Act was passed. The falling labor force participation rate amongst working age adults is mostly a US phenomenon. The more rapidly aging countries of Japan and those in Europe  have moved in the opposite direction. While the more expansive ADA  may only account for a portion of this trend divergence that has sidelined millions of young adults in our country, the implication remains that Americans increasingly choose handouts and leisure over paid work taking advantage of the system.

Although the various trends highlighted here, that have idled millions of working age adults, are somewhat unique to the US, the secular wave of labor shortages are shared by all of our Western allies due to aging demographics. It was forecasted in the 1990’s that working age population growth would begin slowing by 2010 in the US and all 1st world countries and continue for decades into the future. History has shown that strong economies require not only stable Governments securing economic freedom and safety, but a growing workforce to maintain economic prosperity. The US has relied upon an accelerating mountain of trillions in artificial stimulus dollars to boost real consumption as our labor force growth rate fell.  

This review has identified the labor shortages that hinder our economic growth rate capacity. We have also discussed many of the societal problems plaguing our efforts to fully utilize our labor supply. Some long term proposals can help at the margins: better prisoner rehabilitation, more trade schools, small business skill centers, universal pre-K schooling for working parents, drug reforms and better wages. For the current economic recovery, there will eventually be an 8 million+ job recovery due to the vaccine and natural private sector demand pull, despite Government ineptitude. However, due to rising average age levels, the most assured path to a faster US GDP and maximized long term labor pool growth would be through expanding legal immigration.  Attracting talent globally is needed with an emphasis on skilled H1B work visas and foreign students with incentives for permanent retention until our secular labor trend reverses upward. Otherwise we will continue to precariously rely upon the kindness of the Fed imagining ever faster production of digital dollars and debt out of thin air until their is a crisis of confidence someday in the global fiat currency system. Our bet is that while marginal gains will be made due to technological innovation and higher birth rates of immigrants, the odds favor a continued reliance upon Government Central Banks’ modern monetary theory of money creation to artificially grow consumption as desired. As long as inflation and consumer confidence remain stable, then interest rates can stay relatively low and debts will never have to be repaid.  

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