Workers demand better, and that’s a good thing
Employers are finding it harder to exploit low-wage workers, and boy, does that get the folks in the C-suites worked up.
Business news headlines scream about a worker shortage, and conservatives complain that COVID-19 pandemic aid keeps people at home. But there’s another way of looking at it: American workers will refuse to work for lousy wages in exploitative environments when given a little breathing room.
Ever since the virus began spreading here, the U.S. government has engaged in previously incomprehensible macroeconomic experiments, the results of which will have profound repercussions for decades to come.
Both Republicans and Democrats have adopted Modern Monetary Theory, which holds that federal budget deficits do not matter as long as inflation remains low. The previous administration slashed taxes without cutting spending, sending federal deficit spending through the roof before the pandemic.
Since then, the current ad
ministration has spent like a drunken sailor and wants to spend even more in the name of pandemic recovery. In total, the federal government has spent an unprecedented $5 trillion on COVID-19 recovery, and the result has been extraordinary economic growth.
Data firm S&P Global Economics calculates U.S. real gross domestic product, a broad measure of economic activity, will grow 6.7 percent in 2021 and 3.7 percent in 2022, as the stimulus wears off.
Conventional macroeconomic theory suggests such growth will trigger inflation as demand for goods outstrips supply. If this were an Econ-101 test, that would be the correct answer. But we live in a complicated, imperfect world, so economists will argue over this question for the foreseeable future.
The less recognized experiment is the temporary establishment of a Universal Basic Income. For the first time in U.S. history, the federal government ensured that all citizens had some income during the crisis, not just the typical unemployment insurance.
The latest unemployment figures reveal that employers need to offer more than they did in the past to get people back to
work.
Overall, wages are up more than 4 percent compared to 2019, according to Bureau of Labor Statistics data. But hotel and restaurant wages are up 6 percent, and retail is almost as high.
“This is a big deal for these workers,” writes Dean Baker at the leftleaning Center for Economic Policy and Research. “In the case of hotel and restaurant workers, the increases over the last two years come to $1.77 an hour. For someone
working a full-time full-year job (many of these workers only work 20-30 hours a week), this would mean a pay increase of more than $3,500 a year.”
These workers have seen stagnant or shrinking wages for the last 30 years, so this is a desperately needed corrective. These workers also represent a small proportion of the total U.S. workforce, so paying them more will not significantly influence the inflation rate.
Instead, wages like
these might help reduce poverty and childhood hunger, two things the COVID-19 pandemic made much worse.
Thanks to government aid, workers can afford to demand better, and they are going back to work for employers willing to treat them with respect.
“Despite all the talk of labor shortages, there does seem to have been a lot of hiring in June, particularly in the leisure and hospitality sector, where payrolls were up by 343,000,” wrote Brian
Coulton, chief economist at Fitch Group, a financial analysis company also owned by the Hearst Corp.
U.S. employers added a net 850,000 jobs across all sectors in June, according to the Labor Department.
Workers are selective, though. Nearly two-thirds of gig workers want a full-time job with benefits, according to a survey of 25,000 Americans by the consulting firm Mckinsey and Co. and polling company Ipsos. In addition, half say most workers are not fairly recognized and rewarded for their work.
“Women in our survey reported greater pessimism about economic opportunity, with only 26 percent of female respondents reporting that the pay that most people receive allows for a good quality of life,” the survey reported. “Among Black women, just 32 percent said that they believe that most Americans have opportunities to find good jobs, compared with 38 percent of white women and 42 percent of respondents as a whole.”
American workers, in other words, are fed up. They are fed up with poor pay, bad treatment and lousy support systems, particularly in health and child care. So if an employer is having a hard time finding workers, their takeaway should be that they need to offer better working conditions.
No one can predict how long workers will have the upper hand in employment negotiations, but this period is undoubtedly fascinating from an economist’s perspective. After 30 years of watching the rich capture almost all of the newly created wealth, seeing workers demand better is refreshing.