Long after COVID, scarce labor is likely to keep business under pressure | News

Reggie Kaji’s employment agency received a bizarre request last year: Could he find 200 migrant workers willing to take a bus from Texas to Detroit, where they would be housed in hotels while working in a factory who makes car doors for the big three automakers?

“I’ve never seen anything like it,” says Kaji, who had to tell the potential customer that he couldn’t guarantee to find qualified people to operate this type of machine. “A low-wage employee, with little education, can walk through a door and find a job.”

It’s a classic story of the workers’ pandemic crisis. Successive US jobs reports – the December one is due Friday – have shown a shrinking workforce, with potential employees sidelined or taking early retirement. Bosses are desperate for new hires to meet rising demand, boost wages and give inflation-conscious Federal Reserve officials something else to watch.

What is less well understood is that, in many industries, labor shortages are likely to persist for years, if not decades, after Covid-19 subsides.

The labor force is expected to grow by just 6.5 million workers by 2030, according to the Bureau of Labor Statistics. That’s down from nearly 10 million for the ten years ending in 2019, and even larger numbers in previous decades.

A combination of slower population growth inside the country and a decline in the number of migrants arriving from outside – both exacerbated by the pandemic, but also predating it – suggests that in times With strong or even steady economic growth, businesses could struggle to find people for entry-level jobs.

“Call it a crisis if you want, but it’s building,” said St. Louis Fed economist William Emmons. “We have a problem. Where will the workers come from?

Along with falling birth rates and rising death rates, trends that worsened after the financial crisis and again during the pandemic, “immigration is likely to be slower and slower,” says Emmons . “That safety valve that has allowed us to continue to operate an economy based on an inexhaustible supply of low-cost, low-skilled labor – which is unlikely to be sustainable.”

Similar demographics in developed economies have fueled a debate about whether decades of low inflation could be reversed as fewer workers enjoy greater bargaining power and wages rise.

Businesses got a glimpse of the labor shortage at the end of 2019, with the unemployment rate dropping to 3.5%. The Fed’s regional survey for November that year reported a labor shortage that “covers most industries and skill levels.”

Even some giant corporations capable of offering higher salaries may see limits looming.

“The foundation of the economy is work,” Elon Musk said in a video interview with The Wall Street Journal on Dec. 6, explaining why Tesla is working hard to develop robots. “There are not enough people. I can’t stress that enough.

Along with health care and social services, as baby boomers age, the BLS says leisure and hospitality will be the fastest growing employer over the next decade.

That means a lot more demand for workers like Xochitl Anguiano, a Mexican immigrant who is now a lawful permanent resident and a hotel room attendant in Las Vegas.

But net migration flows decline with national birth rates. There is a pandemic shortfall of almost a million work visas. Last month’s announcement by the Department of Homeland Security of 20,000 additional permits for seasonal guest workers barely eroded that. And migration is entangled in politics, making it difficult to reopen doors.

Additionally, Anguiano’s family is symbolic of the number of children of immigrants reaching higher levels of education, meaning they are unlikely to enter their parents’ work.

As a member of Culinary Workers Union Local 226, Anguiano enjoyed benefits — from health care and retirement to immigration legal assistance — that helped her focus on family life and raising their children.

Now, one of her daughters has a biology degree from the University of Nevada and plans to take medical school entrance exams in March, while another is finishing a business degree at the same university.

Slowing workforce growth means companies will have to refocus their recruiting for just about every occupation, seeking candidates from different types of schools and family backgrounds they are used to.

There’s a lot of work to be done on that front, says Jacob Martinez, founder of Digital NEST in California, which seeks to help people in rural areas find work in technology and similar industries.

“The truth is, they don’t get those jobs,” Martinez says of his students, many of whom are Hispanic. Big tech or even local tech isn’t recruiting much in cities like Gilroy or Watsonville, Calif., better known as the strawberry and garlic capitals, he says.

“I can’t reach the heads of Google and Twitter,” Martinez says. “They work with big universities as they look for talent.”

Business groups point to the need for more labor from outside the country, to fill Anguiano’s type of jobs.

“Hotels have always been a major employer of immigrants,” says Curt Cashour, vice president of media relations at the American Hotel and Lodging Association. “Our current immigration system is not working.”

Tight labor markets can boost productivity as companies work more efficiently and invest in better equipment and software. The current pressure has also brought benefits to workers. According to the Atlanta Fed, those with only a high school diploma enjoyed faster wage growth than other groups last year.

Such conditions could prevail “for a while,” says Nick Bunker, North America research director at the Indeed Hiring Lab. “Population growth is slower, and we’re just going to have fewer people in those younger cohorts.”

Companies still have room to attract workers from the margins with better wages and benefits, even without more migration. General measures of labor market participation among people of working age remain below pre-pandemic levels. “High demand can induce supply,” is how Bunker puts it.

What this would likely mean in practice, as it did at the end of the last decade, is that long-standing barriers to work – from racial prejudice to criminal records – disappear as companies compete. to hire.

Kaji, the head of the employment agency, has seen some of these trends in action, with demand for semi-skilled workers in the manufacturing sector on fire.

Drug tests are suppressed, as are conviction records, in some cases. Employees hired as temps get permanent jobs in three months or less, instead of nine.

“If someone didn’t have a year’s work history, we wouldn’t talk to them,” Kaji says. “We had to relax our restrictions to six months of work history, then to three months.” Even one of the few remaining requirements – a high school diploma – no longer applies at all levels.

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