Adjusted for inflation, average wages have been declining for the past year. But does this really mean lower costs for employers? Maybe health insurance costs more. Maybe office rents have gone up. Let's check:
The ECI is a measure of the total cost of employment, and it's been going down since the start of the pandemic. In 2021 it dropped two full percentage points. Employers continue to complain that they can't find enough workers, but apparently the real problem is that they like their current profit levels more than they like the idea of expanding production by paying higher wages to attract more job applicants.
This chart goes through the end of 2021. Data for the first quarter of 2022 will be available at the end of April.
Doesn't the total cost of employment decline when you just can't hire enough people? We are having a tough time finding anyone with a certain qualification they must have--it seems that virtually everyone with this qualification is hired. And, during the COVID shutdowns people weren't going out and getting qualified, so there will be a lag of a few years before enough people can be hired no matter what we pay. It seems to be that way with trucking and other skilled professions like welding or plumbing for example, at least where I am. Every contracting company is advertising for certain skills, and it is impossible to get work done in these areas as a consumer. I was told I would have to wait 6 months to get a furnace problem checked out even though it was the middle of the winter. You can offer all the pay you want, but not everyone is willing to up and move their family out of schools, etc. to get a job that pays more. In the long run, higher pay makes a difference, but it takes awhile.
They really should commit to training.
Yeah. Like I don’t disbelieve in everything Zephyr said, but it seems strange that no allegedly “desperate for employees”company seems willing to simply hire people without the “necessary” skills or credentials, and then PAY FOR THEM TO BE TRAINED ON THE JOB. I mean, a hundred years ago, people became plumbers or whatever by apprenticing under an existing plumber for a few months or years. Why can this not be done today? (Besides of course it would cut into profits and totally goes against all management philosophy about how workers should just materialize with the appropriate skills and credentials at the time of hiring at no cost to the company.)
Can't hire employees and "train on the job" because the certification is required by the government and insurance to do the job, plus we just don't have the people or the program in place to provide the certifications, which take years to get. And, we're a nonprofit, so no profits to reduce by paying higher wages. When we pay someone more we need to reduce programs and/or do more fundraising in order to afford it. In any case, I totally agree that higher wages lead to being able to hire more and better employees, but it doesn't happen overnight. You don't instantly get more employees when you raise wages.
No. No certificate is needed for trainees.
Still means they haven't raised renumeration.
It seems to me that you have to adjust for composition effects: the above chart could be true even if every worked is earning more now than at any previous time they were employed.
For a simplified example, let's propose there are only two groups: office workers making $5x, and waitstaff making $1x, for an average wage of $2x; during COVID, 10% of the office workers and 90% of the waitstaff were unemployed, so the average wage went to $4x. The waitstaff got a 25% raise, and everyone is back to work.
But average pay went from almost $4x to only about $2.5x as the waitstaff went back to work.
It's a yry effect. Remove used car inflation and nominal wage growth is keeping up with price inflation. It's the shifty composition is making a mess of traditional statistics. Alot of sacred cows will be dead by 2025.
This.
apparently the real problem is that they like their current profit levels more than they like the idea of expanding production by paying higher wages to attract more job applicants.
Same as it ever was.
I get the point made upthread that sometimes higher wage levels can take a while to break though a logjam of unfilled positions, but right now, from the data I've seen for most jobs, wage increases are simply not even keeping up with inflation, much less rising enough to get people to consider applying for a new job. Kevin's pretty much right, I think: companies simply aren't willing to raise compensation enough to lure qualified candidates away from their current positions. The problem with skilled trades is that fewer young people are seeking out training and apprenticeships and so the pipeline of new welders, machinists, and plumbers just isn't there. It's too bad, because you can make really good money. In the meantime, though, we're stuck waiting six months to get an electrician.
Where then is the chart of profit covering the business covered in the cost chart you posted?
It is Friday and this chart make my brain hurt. Am I correct in assuming that it measures the costs of keeping an imaginary employee X? So in Q2 2020, X needed to be paid 3.75ish% more than the level of inflation compared to 2017 but in Q4 2021, that same employee is only getting paid 0.75ish% more than inflation? And even though company Y had to fire 100 people and only employee X remained in Q2 2020, their ECI was 3.75ish%?
I believe this chart shows total costs, not cost per worker or cost per hour worked. If so, it doesn't really capture the data necessary to make the point that Kevin is trying to make.
The below chart shows total inflation adjusted employment costs (wages, benefits, etc..) per hour worked. I think its more relevant to the topic.
https://fred.stlouisfed.org/graph/fredgraph.png?g=NLDI
Wow.
The headlines to KDs stories today almost answer some of the questions raised.
After inflation wages are going down
Worker shortages are causing higher wages and hence higher inflation
It's so bad Amazon workers in LI voted to unionize
What a conundrum!! Good solid conservative republicans want to return to the society of the 1950s where women, blacks and gays "knew their place" - but those same conservative republicans don't want 80 - 90% tax rates on the wealthy, paying down debt from the world wars etc............
Where politicians could control the press "Hey don't print that you saw the President with................and we'll give you and exclusive story"
What a week it has been in the news.......
Blacks and Gays???? Republicans hate being white. They are jew pedo's wannabe 's.