Less workers than there are jobs to fill?
In other news this is also something I was wondering about. Weâre actually not short of goods relative to 2019, we are just buying goods at a much higher clip than we were 2 years ago. Very fascinating stuff int his article.
Markets react to that by adjusting wages. I donât recall big increases in ordinary workersâ wages.
Before the pandemic, the US govât was running an annual deficit of almost $1 trillion. Conventional wisdom is that deficit spending âheats upâ the economy. If there were âtoo manyâ jobs, maybe that was due to an unsustainable federal fiscal policy.
I think wages were starting to raise prior to the pandemic. Iâm actually not sure we wouldnât be exactly where we are right now if the pandemic never happened at all. I have no idea how to show that, but itâs my hunch.
From an article in The Atlantic
As I wrote in the spring, quitting is a concept typically associated with losers and loafers. But this level of quitting is really an expression of optimism that says, We can do better . You may have heard the story that in the golden age of American labor, 20th-century workers stayed in one job for 40 years and retired with a gold watch. But thatâs a total myth. The truth is people in the 1960s and â70s quit their jobs more often than they have in the past 20 years, and the economy was better off for it. Since the 1980s, Americans have quit less, and many have clung to crappy jobs for fear that the safety net wouldnât support them while they looked for a new one. But Americans seem to be done with sticking it out. And theyâre being rewarded for their lack of patience: Wages for low-income workers are rising at their fastest rate since the Great Recession. The Great Resignation is, literally, great.
For workers, that is. For the far smaller number of employers and bossesâwho in pre-pandemic times were much more comfortableâthis economy must feel like leaping from the frying pan of economic chaos, only to land in the fires of Manager Hell. Job openings are sky-high. Many positions are going unfilled for months. Meanwhile, supply chains are breaking down because of a hydra of bottlenecks. Running a company requires people and parts. With people quitting and parts missing, it must kinda suck to be a boss right now. (Oh, well!)
I read it on an app, so no linkage, sry. Author = Derek Thompson, a staff writer at the magazine.
And Iâll leave with yet another plug for supporting journalism. Get a subscription to an edited publication. I donât care right, left, or otherwise. In fact, get one of each!
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I absolutely agree what is going on is a good thing. The inflation and all. It means those at the bottom are doing better.
Wrt to finance: great for debtors, hard luck for creditors.
Betcha wish you were in, say, real estate development and resorts, or the like. Just sayin.
This is absolutely not true. Inflation hurts the poor the most. They have little to no non-cash assets so all they have is value of labor. Wages are NOT keeping up with inflation now.
That doesnât include the fact that if unskilled labor gets too expensive relative to technological replacements you end up with fewer unskilled jobs. That isnât happening yet. But it is a distinct possibility on the horizon. After all fast food joints didnât start using kiosks in place of cashiers for at least 15 years after the tech was available.
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Ummm, got a source for this? Latest full calendar year would be 2019 / 2020. I just casually found an inflation adjusted figure by decile, and the numbers tell a different story.
Inflation adjusted wage growth table
Table 1
Hourly wages of all workers, by wage percentile, selected years,
Last year cal 10th. 20th. 30th. 40th. 50th.. 60th. 70th. 80th. 90th⌠95th|
Annualized percent changes|
2019â2020 8.0% 7.7% 3.3% 6.3% 6.9%. 7.4%. 6.1%. 7.1%. 8.6%. 15.2%
These are net of inflation, and all positive. Itâs just one source, but the authors are clear that..
Instead of being good news, the rapid wage growth shown in Table 1 and Figure A is largely the result of a very sharp compositional change in the workforce, one that was driven by which parts of the economy lost jobs during the COVID-19 recession. It is largely understood that job losses disproportionately occurred in sectors that require face-to-face interactions, such as leisure and hospitality. The average wage in leisure and hospitality is the lowest of all the major industrial sectors (BLS-CES 2021). Similarly, using median wages of each major occupation, Federal Reserve Bank of New York researchers find that lower wage occupations have experienced the sharpest employment losses since February 2020 (Abel and Deitz 2021).
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Did you read the article you linked in its entirety? That âgrowthâ youâre reporting is also influenced by the loss of a significant chunk of the low wage earners. That is, a wage earner in the 2nd decile in 2019 is now likely to be in the 1st decile in 2020. So what is most likely being shown by the numbers youâre quoting is primarily a leftward shift of most of the data (and if Iâm reading the first part correctly, generally by nearly 1 decile).
Put another way: one might assume that the average for decile 1 for 2020 is a weighted average of deciles 1 and 2 of 2019 (in this case, 63.7% of decile 1 and 36.3% of decile 2). Applying this same process to 2018, we would see a âwage increaseâ in decile 1 of around 7% from 2018 to 2019.
Using this as a gauge, it appears that wage growth in that first decile is only 1% (in line with âsmoothedâ values shown in that table). But inflation in 2020 was 1.4% (it was around 2% for 2018 and 2019). And it looks like itâs going to be higher in 2021 (due to supply/shipping issues more than economy).
So Iâd say that âlow wage earnersâ increases in wage levels are not keeping up with inflation. And this is also born out in the table as well.
Were the % weights in the article or did you infer them from the other figures? I think I mostly agree other than the weightings. 25% of the workforce is 40M, and the lowest quartile lost ~8M, or 20%. Could have missed something, but the wage is definitely overstated because of the skew.
That would be the NOW part. Inflation has been running 5%+ for several months now. Unless you think wage growth has been keeping up that pace (it hasnât) we have a problem now. Why would you even look for the last full yearâs numbers when the talking about inflation given that it has increased hugely in the current year?
Inferred it by solving 11.02 = 10.20w + 12.46(1 - w); the 2020 value from the two 2019 numbers.
Losing 20% of the count doesnât necessarily translate into the same percentage of change in the wage value. The weight I estimated may also not be âperfectâ, but seem to be actuarially reasonable for making additional adjustments to create something that is closer to an âapples-to-applesâ comparison.
I do think that the weight for the other âdecileâ shifts are very likely to be different, though; with the shifting to be less and less for the higher deciles.
One might even say thatâs itâs been embiggened.
Yep. I read it. Thatâs why I included the passage introducing that aspect in the post. Whether or not inflation hurts low wage workers or not is a very nuanced question. Highlighting that was my intention. Itâs not black and white. So I asked Danny if he could provide his data. Which we have not seen yet. Iâd love to see how he derives the instantaneous rates of wage increase and inflation.
Iâm quite certain that data supporting his argument does exist. And the displacement, or leftward shift as you put it, deserves some reflection. Are people who decide not to go back to work at a crappy job in hospitality really hurt? They made their choice: no job ls better than the one they had in hospitality before. It is not at all clear they re hurt. They obviously think they are better off. Thereâs probably a zillion reasons why. And itâs not because there are no job openings. Itâs fascinating.
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Incorrect for the bottom quartile. This is dead wrong over the last 2 years.
This article touches on the wage growth in low income jobs. It was 7% from 2019 to 2020. I assume it is far more than that this year. Anecdotally many places around Louisville have gone from a starting wage of $10/hour to $15/ hour. That will swamp 6% inflation every single day. Any particular worker in the bottom quartile of income has multiple opportunities to grab higher wages right now through increased hours and increased hourly wages. This inflationary market is impacting people with solid long term jobs much more than it is low income workers.
5% is a YOY number not month over month.
My brain immediately went to this idea in general, but I was too lazy to do any research, so thx.
No, really? Are you sure? 
Thatâs the same article that Eimon posted . . . and that â7%â is somewhat distorted in that it does not reflect someoneâs wage in that first decile grew that much as some of those in the second decile in 2019 are now in that first decile in 2020 due to loss of workers in those low-wage categories.