In December of 2022, Jerome Powell, Chair of the Federal Reserve, noted in a conference meeting that he believes the US is current in the midst of a ‘structural labor shortage’.
Speaking on the climate entering 2023, Powell stated that “the labor market remains extremely tight”.
“[It] continues to be out of balance, with demand substantially exceeding the supply of available workers. The labor force participation rate is little changed since the beginning of the year,” he added.
The news shouldn’t be shocking to many. We’ve been hearing about an acute labor shortage for well over 12 months, and the outlook for 2023 seems to be largely unchanging.
However, not all agree with Powell’s stance. In fact, there are those among the US’ most senior experts in the labor market, such as Robert Reich, Former United States Secretary of Labor, that believe the current news of shortages across all sectors is a myth.
“Here’s the truth. There is no labor shortage,” said Reich, speaking in The Guardian.
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Instead, he proffered that the jobs climate is instead being caused by a shortage of jobs paying sufficient wages to attract workers to fill job openings – something he noted was a product of economic downturn, not a shortage of willing professionals.
“Economists offered similar warnings of a ‘labor shortage’ after the financial crisis and recession of 2008-09. But when the economy strengthened and wages rose, the so-called “labor shortage” magically disappeared,” he noted.
“You don’t have to be a financial wizard to see why some workers might say the hell with it,” he added.
The solution to the issue, he noted, was simply increasing pay in line with inflation, therefore motivating workers back into the active workforce.
“If we want more people to take jobs and we wish to live in a decent society, the answer is to pay people more,” he concluded.