Labor Shortage BS

How many times have you heard some financial-news type (i.e. Jim Cramer) talk about how there's a "skills gap" or a "skilled labor shortage," and the government has to do SOMETHING BIG RIGHT NOW to fix that problem (never mind that the "something big right now" tends to involve training workers after the same Jim Cramer types bitch and moan over having to pay taxes for schools, but I digress).

Anyway,  with the seemingly never ending Obama Recovery driving unemployment down to 4%, you would think that sooner or later wages would start to rise. For the record, lets look at inflation adjusted wages over time:

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This is what Americans have been making, adjusted for inflation, for about 50 years. Note the low point in those wages? Yeah, that's about the time I turned 18. Wages then picked up pretty quickly until about 2000, at which point they essentially flattened out until the recession, picked back up, and have more or less stayed constant.

While that wage growth is pathetic, it certainly has redounded to the benefit of someone. I wonder who:

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A few things jump out at me from looking at these two graphs. First, they're not a perfect overlay. Second, the wealth share going to the top 1% appears to have at least doubled and nearly tripled since approximately 1970.

In light of this background, I give you a recent blurb from Slate, which I would highly recommend:

Corporate executives and Wall Street types come up with all sorts of reasons why it’s supposedly dangerous to let the unemployment rate drop too low. They talk about how the economy might “overheat,” leading to a dreaded bout of inflation. They may talk about “worker shortages” that make it hard to find the right talent.

But in the end, most of this is just verbiage meant to skirt the real concern: Companies are worried that if unemployment falls far enough, they’ll have to pay workers more, and that will cut into their profits. With the official jobless rate at 4 percent, that’s already beginning to happen at some companies, the Wall Street Journal reports today. Ten percent of companies in the S&P 500 have claimed that higher wages hurt their earnings in the first quarter, it notes. Goldman Sachs is predicting that “every percentage-point increase in labor-cost inflation will drag down earnings of companies in the S&P 500 by 0.8%.”

. . . . . . .

 This, of course, is considered a nightmare. “At the end of the day, I haven’t heard this many CEOs talk about shortages in skilled labor and wage increases to attract talent in a long time—in at least a decade,” one money manager told the paper.

Keep that quote in mind the next time you read an overwrought article about ill-defined “worker shortages.” C-suiters have created an entire coded language that lets them spin a strong labor market as a threat to the economy, when in reality it mostly just poses a marginal threat to their bottom line. A CEO can go on CNBC and say that his company is coping with a “labor shortage” without seeming like a self-interested capitalist, when in reality, he’s just trying to explain why a healthy economy is bad for his shareholders.

So, the next time you hear about worker shortages, ask whoever brings them up to point out where the wages are skyrocketing. After all, if the world desperately needed someone who was able to work on a Tuttle-Tut Machine and only one guy knew how, his wages would be astronomical. If, on the other hand, there were plenty of people who knew how to work on Tuttle-Tut Machines but they demanded a decent wage, perhaps the owners of the Tuttle-Tut Machine Shop would start making noise about how the public needs to shoulder the cost of training more Tuttle-Tut Mechanics, simply as a way to drive down the wages and increase the shop's bargaining power.

Food for thought.