The chief executive of Domino’s Pizza has complained that the company can’t hire enough drivers. Lyft and Uber claim to have a similar problem. A McDonald’s franchise in Florida offered $50 to anybody willing to show up for an interview. And some fast-food outlets have hung signs in their windows saying, “No one wants to work anymore.”
The idea that the United States suffers from a labor shortage is fast becoming conventional wisdom. But before you accept the idea, it’s worth taking a few minutes to think it through.
Once you do, you may realize that the labor shortage is more myth than reality.
Let’s start with some basic economics. The U.S. is a capitalist country, and one of the beauties of capitalism is its mechanism for dealing with shortages. In a communist system, people must wait in long lines when there is more demand than supply for an item. That’s an actual shortage. In a capitalist economy, however, there is a ready solution.
The company or person providing the item raises its price. Doing so causes other providers to see an opportunity for profit and enter the market, increasing supply. To take a hypothetical example, a shortage of baguettes in a town will lead to higher prices, which will in turn cause more local bakeries to begin making their own baguettes (and also cause some families to choose other forms of starch). Suddenly, the baguette shortage is no more.
solve the problem by offering to pay a higher price for that labor — also known as higher wages. More workers will then enter the labor market. Suddenly, the labor shortage will be no more.
a lot of evidence to suggest that the U.S. economy does not suffer from that problem.
If anything, wages today are historically low. They have been growing slowly for decades for every income group other than the affluent. As a share of gross domestic product, worker compensation is lower than at any point in the second half of the 20th century. Two main causes are corporate consolidation and shrinking labor unions, which together have given employers more workplace power and employees less of it.