T HE PANDEMIC has led to all sorts of weird economic outcomes. The latest oddity is the growing chorus of complaints in America about a shortage of la

Help wanted Why are American workers becoming harder to find?

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2021-06-06 20:00:04

T HE PANDEMIC has led to all sorts of weird economic outcomes. The latest oddity is the growing chorus of complaints in America about a shortage of labour, even though 8m fewer people are in work today than before covid-19 struck. In early April Bloomberg reported that Delta Air Lines had cancelled 100 flights for lack of staff. People are so hard to find that one café in Florida has turned to robots to greet customers and deliver food. A branch of McDonald’s is paying potential burger-flippers $50 just to turn up for a job interview.

The data back up the anecdotes. Total vacancies are running at their highest level for at least two decades (see chart), indicating that firms have plenty of unfilled positions. Furthermore, job openings are leading to fewer hires than you would expect based on the historical relationship between the two. And even accounting for changes in the composition of the workforce, wage growth, at about 3%, has been surprisingly robust, suggesting that firms are offering bigger pay packets to tempt workers. If they persist job shortages could eventually fuel inflation, threatening the economic recovery.

There are three potential explanations for the puzzling shortages: over-generous benefits; fearful workers; and a reallocation of labour between industries. Start with America’s huge fiscal handouts. The latest stimulus cheques, posted in the spring, were for up to $1,400 per person. Seemingly every American knows of a neighbour’s cousin’s boyfriend who received a “stimmy” cheque, then quit his job in order to sit on the sofa. A federal supplement to unemployment insurance (UI), currently $300 a week, ensures that four in ten unemployed people earn more from benefits than they did in their previous job. Economic research has long concluded that more generous benefits blunt incentives to look for work.

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