It’s hard to believe that we are well into Year 3 of the CV19 pandemic. While cases & fatalities are about the same as this time last year, the lead headlines have moved onto the economy – particularly inflation and unemployment.
The jobs situation is a bit of a question mark to me. The unemployment rate is very low, mostly as a function of less people working. The ‘Labor Force Participation Rate’ fell sharply with the government lockdowns. This Federal Reserve graph shows how much it was impacted – and that it hasn’t yet recovered.
Enter the ‘Great Resignation’ theory. Economic analysts have postulated that much of this decline is driven by people retiring early during the pandemic. The Brooking Institute estimates the dip represents 3-3.5 million workers.
It turns out that the Great Resignation to retirement is a myth. The average age of retirement in 2020 & 2021 was pretty flat with the incoming trend according to Gallup, who has been the authority on retirement age in the US for decades. Look at the black line …
So if it is not people retiring early, why are there fewer workers in the labor force? It looks like younger folks might be a big part of that. Bloomberg shows that the labor participation rate of folks aged 18-34 is down pretty substantially …
So it looks like the Great Resignation may simply be a ‘Late Start’ for young people whose student years were hugely interrupted by the pandemic. That also fits with the reality that it is front line jobs in retail and hospitality that are most likely to be short-staffed.
What has been your understanding of the worker shortage?
Image Credit: Pixabay
MrFireStation 
I absolutely agree. We retired early in 2017. Initially, when we’d go out during the week, we would laugh and say, “we are so much younger than everyone” that we would see in restaurants, breweries, the mall, or just traveling around the country in general. Initially we were only seeing traditional retirees out and about during the weekdays. Now, we often remark at how many 20-40 year olds we see traveling or just hanging out at breweries during the week days. We are constantly having a conversation about how they can possibly afford it at their ages or stage in life. It’s very clear to me, that the next generation is taking a few gap years to the extreme. Traditional work, the pandemic, the looming recession, etc. is just too much to process for them. I think that they’ve just decided life is too hard, and they’re going to try and just enjoy life without the traditional work model. Don’t get me wrong, I’m all for ingenuity and creating a better (easier) working model as long as it’s still productive for society. I’m sure a few are just taking advantage of the work from home model, but there are too many for this to be the only answer. I fear their lack of participation in a working society will culminate in a weaker overall society ie. less creativity, less forced ingenuity, and less innovation. I also fear it may eventually force those of us who have done our time to pay for their less productive lifestyles via taxes to cover their longer term expenses (that they are not properly building up savings for). We shall see how this plays out. I don’t mean to sound pessimistic, but I fear it won’t end well…for any of us…
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Extended “gap years” is a good analogy. I’ve also read that a lot of young people stayed living with their parents longer during the pandemic. Hard to know the long term costs of that now, but certainly a big societal change.
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Looking back at my journey into the Middle Class, I worked six twelve hour shifts for 13 weeks during the summer at a job that paid slightly over minimum wage and was able to 100% self finance my college education. By my Junior year I was living in a two bedroom apartment where I shared the rent with one other student, and stayed in it while working during the summer at a better job in the electrical engineering field. This path was the norm in the late 70s.
During my Senior Year I visited an exchange student in Mexico, and was shocked to see that young adults were still living at home when they were pushing 30. We have become just like Mexico.
Entry level jobs have failed to keep up with the two major cost drivers for young adults that are college and housing. America’s young adults are on “financial life support” from their parents by living at home longer and receiving more financial assistance, because they cannot make the numbers work on their own. There is a difference between having to work to support yourself, and working because you should help out with the knowledge that Mom and Dad will backstop you. College loans exacerbates the situation.
Our generation often worked jobs that were not our dream jobs, but we did anyway because we had to. Those who are backstopped by Mom and Dad will walk away from jobs they feel are beneath them.
There are two ways to get entry level wages back in balance with entry level costs. Outlawing student loans would stop college tuition inflation dead in its tracks. The US also needs to reduce illegal immigration and outlaw H1-Bs. Illegal immigration causes downward pressure on entry level wages, while increasing demand for housing. H1-B’s creates more downward pressure on recent college graduates salaries.
I once had a discussion with a business acquaintance about my path and how illegal immigration would have hurt my ability to pay for college. The business acquaintance told me, “Illegals only work the jobs no one wants to work.” I responded that they are working the jobs at an artificially low price point that no one wants to work at.
I told him that the norm in the 70s was for students to pay for their own college by working long hours during the summer. Rural kids worked jobs picking green beans for Green Giant or de-tasseling corn for Pioneer. The business acquaintance told me that his wife paid her way through college de-tasseling corn, but she would not be able to get that job today because illegal immigrates have a lock on that labor, and besides it doesn’t pay enough. I rested my case.
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Interesting comments that I can relate to in a few ways.
When I was at MegaCorp many years ago, we did consumer research with Hispanic moms on our food products and their lifestyle. We learned that many of them had adult children at home and very negative attitudes of how American families raised their kids. They couldn’t understand the high rate of divorce in American households and the way that “parents push their kids out of the household as they grow up.” They really seemed disgusted at the way American families would break apart (or start fatherless). It was an eye opener for me that our approach to family life in the USA may be failing.
As a result, we’ve stayed very close with our son as he’s grown to adulthood and been willing to financially help if needed. To his credit, he’s hard working, has a great professional job, and a lot of independence. At the same time, he lives in our neighborhood, we do a lot together, and we’re all able to help each other out when needed. Many of our friends are envious of our adult relationship. It’s working for us, for now at least.
On another note, I too wonder what happen to all the jobs for students. I started as a paperboy, spent a summer detasseling corn (yes, Pioneer!), and worked at a Target Store. I know from the data that it is less common now. The push for higher minimum wages means that these jobs get automated. McDonalds quietly slashed HALF its restaurant workforce between 2012-2018. This was even before the rise of automated kiosk cashiers. It seems that employers and teens are walking away from each other at the same time.
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One other thought I remember from my trip to Mexico in 1980, is that most parents did not want their young adult children moving to the US. Our country was seen as not having good values.
We may see your study in action in areas of the country where Hispanics are walking away from the Democrat Party?
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We’ll see. Unfortunately, single-parent households are rapidly rising for every racial group in the USA … https://en.wikipedia.org/wiki/Single_parents_in_the_United_States
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I just wanted to hit ‘like’ but my computer won’t let me 🙂
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Pay is too low. If you cannot earn enough money for the basics, why work. I had two co-workers quit working SPPS as Target paid a higher wage. They only needed one full time job to get buy. Starting this Fall education employees are all getting raises, hopefully our schools will be staffed. Other licensed staff are having problems with not being able to afford a place to live and seek out room mates, etc., The idea of eliminating college debt is a good idea. People cannot afford the high prices on absolutely everything. We are rapidly becoming 3rd world. Homeless camps are everywhere in the inner city. You won’t see them driving around, they hide in nooks and crannies. You will see them in suburban neighborhoods in a year or so. It reminds of South America or Mexico. If you have money, you live in a gated community and you can’t leave that community. Minneapolis neighborhoods are already organizing by hiring police on their own for x-tra patrols. I support this and am considering asking if condo associations can do this in downtown St. Paul, so I don’t have to move. I’d be happy to pay x-tra dues for Asia Security to patrol my neighborhood so I could go for a walk. It’s all about the money today, rich get richer, poor get poorer. I don’t really want to eat in a fancy restaurant, I remember the 80’s when staff would spit in your dinner and watch you eat it. Sorry I rambled.
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There was no college debt when I graduated. Universities have increased their tuition and garbage fees cost 150% the rate of inflation over the past four decades. I think the Universities are starting to get the message that people are getting very upset about the tuition increases driven by higher education student loans.
Some Universities seem to get the message. One of my friends, who lives in WI, daughter is going to Purdue. Mitch Daniels, who went from being the Governor of Indiana to becoming the Chancellor of Purdue, froze tuition at Purdue for the past decade to let tuition get back in alignment. It is actually less expensive for my friend’s top of her class student, who was already taking college classes in high school to go to Purdue than UW – Madison.
My son has been going to UCLA which locks tuition for the entire up to six years of college. This is what the fix for runaway college expenses. Doing the basic blocking and tackling of controlling cost.
Your comment about having to hire private security does not speak well of St. Paul’s local governance. You are paying taxes to paying pay for safe streets. Then when the government fails to provide this basic service, you are forced to go out and buy it again from the private market.
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Those sound like good approaches at Purdue & UCLA. I haven’t heard of anything similar hear in MN. The U of MN Regents just passed a 3.5% tuition increase, which I guess shows some restraint in this inflationary environment.
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I see the homeless camps everywhere. I ride my bike around Minneapolis & St Paul every Tuesday with two buddies. We go all over and see the tents everywhere. Research shows these people aren’t initially homeless because of economics – they have drug & mental health problems. Progressive government won’t deal with them – so they live on the streets, parks, and sidewalks.
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We see the same thing in Los Angeles. There are areas that look like an apocalyptical movie such as Mad Max.
Throwing money or housing at this problem only exacerbates the problem. Our governments are enablers of the addicted.
Modern drugs such as super meth from Mexico and today’s marijuana that is 20X stronger than what was available during the 70s can trigger a full blown mental health episode in someone who is borderline for having them. I learned this from a parent’s group that educates about the dangers of modern illicit drugs.
A solution to homeless would giving the homeless the choices of mental health and rehab treatment or incarceration for breaking the law. Instead of enforcing the laws, and using the threat of incarceration as tool to get the homeless the help they need, they change laws such a decriminalizing shop lifting.
The solution to this problem will be provided by religious organizations such as The Salvation Army. Current government enablers are only making their job harder.
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Chief, Your post about the growth of Single-Parent Households I think is the biggest problem of our time. Bad things happen to teenagers who do not have an engaged Father in the home. Especially for young males.
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Agree – and there is no government solution for it. Everything they try seems to make it worse.
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