Opinion: The Labor Shortage: What Needs to Be Done and Who Can Fix It?

OPINION

The Labor Shortage: What Needs to Be Done, and Who Can Fix It?

BY: JOE POVEROMO

With 2021 coming to a close, it is clear that the fallout of COVID-19 is still being felt throughout the nation, especially in the field of labor economics — specifically, the shortage of labor plaguing the U.S. The high unemployment rates seen in 2020 were followed by an impressive rebound as countrywide employment bounced back faster than expected. This labor crisis was always inevitable; the pandemic only catalyzed the reactions we have now. We have seen an amazing rally of workers during and immediately after the pandemic. People working at home have realized how poorly, in some cases, they are treated in the workplace. In turn, this realization has allowed them the opportunity to redetermine how their positions should function within an organization. One of the biggest problems today lies in the video game industry. The sexual assault and harassment allegations at Activision Blizzard are a perfect example of employees stepping up and holding their supervisors and leaders accountable. Another major problem that was highlighted involved employees being forced to work numerous overtime hours to get games out on schedule. These toxic working conditions were at the company for a long time and it took a lot to empower the workers to stand up for themselves. Another significant facet of the labor crisis is a very simple issue: wages have simply not increased enough to incentivize people to work. Even before the pandemic, the income disparity between the rich, the working class, and the poor was a huge social issue. But after COVID-19, it is clear how exploited the American worker is — and this exploitation has taken away any real incentive to find work. The income differences are incredible. The curves are shaped like a “K,” with the top 1 percent’s income trending heavily upward and the middle and lower classes in freefall. With this exploitation of workers at the forefront of American labor economics, the people want and desperately need wage increases. The minimum wage has been the same for years, and big firms have been paying their employees too little for far too long. The final factor actively contributing to the current labor crisis is the financial cushion that the U.S. government gives the American people. During the pandemic, monetary and fiscal policy was purely expansionary. Not a single politician was brave enough to suggest a tax raise, and not a single federal employee thought higher interest rates were a good idea. Interest rates sat at zero, and the stimulus packages given to the American people made the 2008 stimulus look like pocket change. Atop this massive influx of cash came an increase in savings — specifically for middle- and lower-class people. Because of this cushion, people are not as worried about getting back to work. We saw state pandemic aid fail to get people back to work because employees had enough cash that there was no immediate need for income. These three situations have created a perfect storm for a labor shortage: the exploitation of workers, the sexual abuse of women in the workplace, and the cash infusion of COVID-19 stimulus. To alleviate these issues, both firms and the federal government must take steps. As a country, we must address the disgusting allegations brought upon Activision Blizzard and ensure those responsible for such heinous acts are punished swiftly. The American worker has it bad already; the last thing we need is more workplace sexism and discrimination. The government must back up these women, threaten to punish the company as a whole, and set a precedent for future firms to ensure strict sexual harassment policies are implemented and abided by. A potential fix for the income disparity issue is simply to pay workers more. This seems like an incredibly simple claim because, quite honestly, it is. Big companies have been paying workers terribly, and income for the average American worker has barely risen since the 1970s. As suggested by research done by the Pew

OPINION

The Labor Shortage CONTINUED

Research Center, the median income for the upper class was $207,400 in 2018 versus $192,200 in 2000 (Horowitz et al., 2020). These levels are fairly expected and do not say much alone. However, when we see that the lower-class median income rose from $28,200 in 2000 to $28,700 in 2018, it is obvious that the income disparity problem is and has been a long-time issue. In the same 18-year span, the upper class has increased its median income by $15,200, whereas the lower class’s median income has risen by only approximately $500 (Horowitz et al., 2020). These numbers do not take into account 2019–2021, when the rich gained incredible wealth while the lower and middle classes struggled to increase their income. The bottom line is this — companies need to increase their wages and ensure they pay fairly. This responsibility falls to them. If they want workers, then they have to pay a living wage. The final fix concerns the cushioning effect caused by the extreme expansionary measures that the government took during the pandemic. The fix is to incentivize buying and economic activity in consumer markets, make people want to spend their money, and circulate this money in the economy. With this increase in spending alongside time and monetary or fiscal policy, people will eventually have to return to work and fill the positions that so many organizations desperately need. Increasing interest rates would be a smart move here; doing so also tackles the nationwide inflation problem. Alternatively, the government could go the fiscal route and increase taxes levied or restrict certain unemployment benefits. By following these contractionary steps, the U.S. government can expect more people to go to work and fill spots firms so desperately need.

Joseph Poveromo ’22

Major: Economics with a Philosophy and History Minor Hometown: Naugatuck, CT

REFERENCE

Horowitz, J. M., Igielnik, R., & Kochhar, R. (2020, August 17). Trends in U.S. income and wealth inequality. Pew Research Center’s Social & Demographic Trends Project. https://www.pewresearch.org/social-trends/2020/01/09/trends-inincome-and-wealth-inequality/