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It's interesting to see this reduction in labor demand is coupled with new lows in the unemployment rate. There's a shortage of labor but employers don't seem
by andrewjl 9y ago
It's interesting to see this reduction in labor demand is coupled with new lows in the unemployment rate.
There's a shortage of labor but employers don't seem to be willing to pay more to incentivize more people to enter the workforce (which is partially reflected in the so called "shadow" unemployment rate, which is higher). An increase in the minimum wage will cause one of two things to happen, both net good IMO: either employers to invest more in capital / automation or cause them to give all current and new employees a raise.
- JBlue42 9y agoI do wonder about the shadow rate. My unemployment just ended by running out. Does that mean I'm now counted in that rate? If I had found work, I basically stop certifying for benefits to let them know I'm employed. No one has sent me a letter asking if I'm working or not. I have to assume there are a lot of folks out there in a similar situation.
- TheHegemon 9y ago> employers to invest more in capital / automation or cause them to give all current and new employees a raise Or more cynically: fire employees and do more with the remaining employees.
- andrewjl 9y agoThey'll need to make capital investments in order to do that.
- lotsofpulp 9y agoBecause some work isn't that valuable, and if wages cause the price of that product to rise too much then consumers will forego it. Occupations that pay highly are usually more inelastic in their demand compared to price.
- andrewjl 9y agoIf so, why hasn't that work been automated away by now?
- krapp 9y agoIt likely will be eventually, but in many cases automation would cost more than human labor, so the incentive is to just pay humans less and insist they work harder, in order to maximize their value.
- andrewjl 9y agoThere's all sorts of costs associated with the latter approach, you need to expend capital on equipment, methods to monitor progress, these workers need supervision, etc. I guess that explains why many firms that take this approach are so chaotic at the line worker level. In fact a tech oriented PE firm that buys these businesses out, makes technology investments to improve productivity or eliminate easily automatable labor and then use the savings to scale the business further. (Which would result in net more employment.) I predict we'll see more of these in the coming years.