New Analysis from the Economic Policy Institute Says Wages should be Rising

There a major labor shortage in the US market correct?

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You would certainly think so, based on media reports, with a continuous stream of stories about some sectors, notable manufacturing, leisure and hospitality, of significant challenges in finding labor.

Not so fast. New analysis from the Economic Policy Institute (EPI), a non-profit, non-partisan think tank, puts a different perspective on the topic.

First, EPI does acknowledge there appears to be a true temporary labor shortage in the restaurant and hotel sectors. Outside of that – not so much.

EPI notes that when employers say they are having trouble hiring workers, what they are mean is “I can’t find the workers I need at the wages I want to pay.”

This points to the fact that the footprint of a bona fide labor shortage is rising wages EPI notes.

“Employers who truly face shortages of suitable, interested workers will respond by bidding up wages to attract those workers, and employers whose workers are being poached will raise wages to retain their workers, and so on,” the EPI report notes.

In fact, EPI characterizes the current market for labor as weak, not strong.

“When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market,” EPI write,

Currently, wages are not growing at a rapid pace, EPI says – which should be the case if there really a labor shortage.

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“When a job opening goes unfilled when the labor market is weak, as it is today, employers are even more likely than in normal times to be holding out for an overly qualified candidate at a very cheap price,” EPI adds.

In April, Federal Reserve Chairman Jerome Powell dismissed anecdotal claims of labor market shortages, saying, “We don’t see wages moving up yet. And presumably we would see that in a really tight labor market.”

Recent data on job openings show there were nearly 40% more unemployed workers than job openings overall.

“Without enough job openings to even come close to providing work for all job seekers, it again stretches the imagination to suggest that labor shortages are a core dynamic in the labor market,” EPI concludes.

Coming out of the Great Recession of 2008-2009, “counterintuitive reports about employers not able to find the workers they need really captured the public’s imagination."

But then as now, “a look under the hood reveals that beyond the anecdotes there is little evidence of a real shortage, EPI concludes.

What do you think - labor shortage or no? Let us know your thoughts at the Feedback section below.