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Labor scarcity likely to hurt U.S. businesses long after COVID

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Reggie Kaji’s employment agency received a strange request last year: Could they find 200 migrant workers willing to take a bus from Texas to Detroit, where they would be staying in hotels while working in a factory who makes car doors for the big three car manufacturers?

“I’ve never seen anything like it,” said Kaji, who had to tell the potential customer that he couldn’t guarantee that he would find people qualified to work with this kind of machine. “A low-paid employee with little education can walk through a door and find a job.”

It’s a classic story of pandemic worker pressure. Successive US employment reports – that for December is due on Friday – have shown a shrinking workforce, with potential employees being left out or taking early retirement. Bosses are desperate for new hires to meet growing demand, push up wages and give Federal Reserve officials something else to watch out for, who are leery of inflation.

What is less widely understood is that in many industries, worker shortages are likely to persist for years – if not decades – after COVID-19 is gone.

The labor force is expected to grow by just 6.5 million workers by 2030, according to the Bureau of Labor Statistics (BLS). This is down from nearly 10 million for the 10 years ending 2019, and even larger numbers in previous decades.

A combination of slower population growth inside the country and fewer migrants arriving from outside – both exacerbated by the pandemic but also predating it – suggests that in times of strong economic growth or even a regular one, businesses might have difficulty finding people to enter. level jobs.

“Call it a crisis if you will, but it has developed,” says William Emmons, economist at the St. Louis Fed. ” We have a problem. Where are the workers going to come from? “

Along with falling birth rates and higher death rates, trends that worsened after the financial crisis and again during the pandemic, “immigration is likely to be lower and slower,” Emmons says. “That safety valve that has allowed us to keep running an economy based on an endless supply of low-cost, low-skilled labor – it is unlikely to be sustainable.”

Similar demographics in developed economies have fueled a debate over whether decades of low inflation could be reversed, as fewer workers enjoy greater bargaining power and wages rise.

Businesses got a glimpse of the workforce squeeze at the end of 2019 as the unemployment rate fell to 3.5%. The Fed’s regional survey for November of the same year reported a labor shortage that “has spread across most industries and skill levels.”

Even some giant companies capable of offering higher wages may see limits looming.

“The foundation of the economy is work,” Elon Musk said in a Dec. 6 video interview with the Wall Street Journal, explaining why Tesla is working hard to develop robots. “There aren’t enough people. I cannot stress this enough.

Along with health care and social services, as baby boomers age, the BLS says recreation and hospitality will be the fastest growing employer over the next decade.

That means a lot more demand from workers like Xochitl Anguiano, a Mexican immigrant who is now a lawful permanent resident and a hotel room attendant in Las Vegas.

But net migration flows decrease with national birth rates. There is a pandemic shortage of nearly a million work visas. The Department of Homeland Security’s announcement last month of an additional 20,000 permits for seasonal guest workers barely shakes that off. And migration is entangled in politics, making it difficult to reopen the doors.

In addition, Anguiano’s family is symbolic of the number of children of immigrants who achieve higher levels of education, which means that they are unlikely to access their parents’ work.

As a member of Local 226 of the Union of Culinary Workers, Anguiano received benefits – from health care and pensions to legal aid for immigration matters – that helped her to survive. concentrate on family life and the education of their children.

Today, one of her daughters graduated in biology from the University of Nevada and plans to take the medical entrance exams in March, while another is completing a business degree at the same university.

The slowing growth in the workforce means that companies will have to reorient their recruitments for just about any occupation, looking for candidates from different types of schools and family backgrounds than they are used to. .

There’s a lot of work to be done on this front, says Jacob Martinez, founder of Digital Nest in California, which seeks to help people in rural areas find work in tech and similar industries.

“The truth is, they don’t get these jobs,” Martinez said of his students, many of whom are Hispanic. Big tech or even local tech doesn’t recruit much in cities like Gilroy or Watsonville, Calif., Better known as the Garlic and Strawberry Capitals, he says.

“I can’t reach the heads of Google and Twitter,” says Martinez. “They are working with great universities as they look for talent.”

Business groups are emphasizing the need for more labor from outside the country, to work the kind of jobs Anguiano has.

“Hotels have always been a major employer of immigrants,” says Curt Cashour, vice president of media relations at the American Hotel and Lodging Association. “Our current immigration system is not working.”

Tight labor markets can boost productivity as businesses work more efficiently and invest in better equipment and software. The current squeeze has also brought benefits to workers. Those with only a high school diploma enjoyed faster wage growth than other groups last year, according to the Atlanta Fed.

Such conditions could prevail “for a while,” says Nick Bunker, North America research director for Indeed Hiring Lab. “Population growth is slower, and we’re just going to have fewer people in these younger cohorts.”

There is still room for companies to attract sideline workers with better wages and benefits, even without more migration. General measures of labor market participation among people of working age remain below pre-pandemic levels. “High demand can induce supply,” says Bunker.

What this would likely mean in practice, as it happened at the end of the last decade, is that long-standing barriers to work – from racial biases to criminal records – disappear as companies compete against each other. to hire.

Kaji, the head of the employment agency, has seen some of these trends materialize, with demand for semi-skilled manufacturing workers on fire.

Drug tests are deleted, as are conviction records, in some cases. Temporary workers get permanent jobs in three months or less, instead of nine.

“If someone didn’t have a year of professional experience, we wouldn’t talk to them,” Kaji says. “We had to relax our restrictions to six months of work history and then to three months.” Even one of the few remaining requirements – a high school diploma – no longer applies at all levels.


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