Disappointing workforce recovery is due to low wages, not a labor shortage


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About the authors: Enrique Lopezlira and Ken Jacobs are at the University of California, Berkeley Center for Labor Research and Education.

Today’s jobs report shows a complicated picture for workers. The economy created just 235,000 jobs in August, despite near record vacancies, while hourly wages rose faster than expected. But wait a moment before talking about the labor shortage.

Yes, some employers are having difficulty filling positions as the economy begins to recover from the effects of the pandemic. But that alone is only part of the picture. A labor shortage means there aren’t enough workers, and that’s just not the case right now. While there are many workers available, there are far fewer available, willing and able to work at the current wages offered. In other words, it’s not that the demand for workers is too high, it’s that wages are too low.

While it is true that wages have increased recently for some workers, it would be wrong to believe that all workers now enjoy higher wages and greater bargaining power with employers. Sadly, the truth is that millions of workers continue to earn low wages, making it almost impossible to make ends meet.

The pandemic has worsened the economic situation of low-paid workers, but typical workers’ wages have increased very slowly over the past 40 years. Economic theory asserts that wages are related to productivity, but this is only in theory. The reality is that since 1979 the gap between wages and workers’ productivity has widened considerably, with productivity increasing by 62% during this period, while wages have only increased by 18%. But if workers are more productive than ever, why have they received little of the benefits of this increased productivity? The answer is that more of the earnings go to those at the top – thanks to higher wages at the top end of the income distribution, as well as ever larger corporate profits. And this was made even worse by the pandemic, during which the net worth of billionaires in the United States rose by $ 1 trillion at the same time as 20 million workers lost their jobs.

The summer of 2021 saw welcome wage growth in the middle and bottom of the wage distribution. In terms of industries, the highest wage growth has been in leisure and hospitality (in restaurants and bars, for example), which traditionally pay some of the lowest wages and have experienced the highest pay cuts when Covid-19 hit.

Even with these wage increases, the real wages of these service workers only rebounded in pre-pandemic trends. For workers in these sectors to experience real improvements in their incomes, wages must rise further. However, there is no guarantee that the recent wage growth will last, let alone that further increases will materialize.

One way to ensure a strong wage floor is to raise the federal minimum wage, which has been stuck at $ 7.25 an hour since 2009. Twenty-nine states and the District of Columbia have higher minimum wages than the federal level. , but that means there are 21 other states that don’t. Raising the federal minimum wage to $ 15 an hour and indexing it to inflation would help ensure that all workers, regardless of where they live, receive a living wage and that the value of their wages does not fall apart. not erode again over time.

As the minimum wage raises the floor, more is needed to improve wages and working conditions for the rest of American workers. In order to achieve an overall improvement in wages, it is essential to enable workers who so wish to form unions and engage in collective bargaining. Unions have been shown to not only improve wages and benefits, but also reduce socioeconomic disparities. Unions are raising wages and increasing access to benefits for all workers, with the biggest gains for those who earn the least in non-union workplaces: women and workers of color. Unions do not only benefit their members. When more workers in an industry are unionized, wages increase throughout the industry.

Trade unions also play an important role in promoting the health and safety of workers. At the start of the Covid-19 crisis, unionized workers were more likely to have access to personal protective equipment and paid sick leave. Throughout the crisis, unions have fought for strong protections for workers at work to reduce the spread of Covid-19 and revive the economy.

While support for unions is high, US labor laws make it extremely difficult for workers to organize and win collective bargaining. In one glaring example, currently, if an employer violates the national labor relations law, there are no financial penalties. The Law on the Protection of the Right to Organize (PRO Law), which has now been passed by the House of Representatives and is awaiting a hearing in the Senate, would change that. The PRO law would create stronger remedies, expand bargaining rights and put the decision of whether or not to join a union in the hands of workers, where they belong.

Many workers at the bottom of the ladder have received raises over the past year. A growing body of evidence shows that policies that improve wages and family incomes help reduce racial disparities while having positive long-term effects on a wide range of societal outcomes, from the health of children and adults to civic participation.

These structural and legal factors provide us with an important roadmap to ensure a strong and lasting recovery that works for all Americans. Sustaining wage increases for the majority of workers depends on the decisions we make as a society.

Guest comments like this are written by authors outside of the Barron’s and MarketWatch newsroom. They reflect the views and opinions of the authors. Submit proposed comments and other comments to [email protected].


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