U.S. employers battle labor shortage

As demand for goods and services continues to outpace supply causing pressure within the market, labor shortage continues to be a central focus for employers. Myles Udland breaks down how employers' plans to raise wages might be the solution to the labor shortage.

Video Transcript

JULIE HYMAN: There's a growing list of companies that is both hiring and raising wages. Myles wrote about that in today's Morning Brief. And Myles, you kind of tried to dissect what exactly is going on here. You know, there's been a lot made of the supplemental insurance, unemployment insurance, and stimulus checks that people are getting and that sort of competition for work. But as you point out, the sort of bigger idea of stimulus is also-- and government spending is also sort of driving this trend.

MYLES UDLAND: Yeah, I mean, I think, look, the nice thing about having to write something every day is that it kind of grows over time. And I think even thinking about yesterday's newsletter, I could have made the point a little more clearly. And maybe I will in future editions. And it's basically, the reason we're having the recovery we're having is because of the actions that lawmakers took when they took them in the size that they took them.

So if we look at the wage issue narrowly, why are companies now competing with one another to raise wages for their lowest paid workers at the fastest clip that we've seen in a long time, it's because the government incentivized that class of worker to stay home to stop the spread of the virus, and then to continue the recovery out of this, right, to make consumers-- to put consumers in a better financial position.

And so, the government created the conditions for a private company, like a McDonald's, like an Amazon, like a Chipotle, to then go and have to bid up wages for its workers. And the inflationary impulse is going to be that one-time increase. But after this period, even if wages are held flat at these companies for the next two or three years, we're still looking at folks who are pulling in $3, $4, or $5, $6 more per hour in perpetuity than they were before the pandemic.

And that is likely to have positive impacts on consumer-- on consumption, on the ability for people to move if they so choose, on the ability for people to take the kinds of career risks that economists are often looking for when it comes to labor market dynamism. And I know that the inflation picture can be concerning. The complaints that we're hearing from small business owners around their inability to pay the wages that they would need to attract workers, that is a real part of this labor market story.

You know, I think a real reason why hiring has been sluggish is because of that factor. But this is, again, an outgrowth of the government's decision to go big on stimulus last year. And I know that there's this whole, oh, it's uncharted-- we've never been here before. Well, that's true, but let's remember, we went way too small after the financial crisis. And it took seven years for the labor market to get towards anything close to the pre-crisis dynamism, pre-crisis pay, pre-crisis-- essentially pre-crisis labor market, if we want to just call it that.

And that's not going to be the situation this time around. So I think policymakers learned that lesson. They're applying it this time. We do not know what's going to happen, but we can say for sure that there has been a pickup in the economy at a faster and quicker clip than there was after the last crisis. And I think that if that's the baseline for judging the effectiveness of policy, then I think so far, it's been a success.

And, again, it kind of comes to this idea that the future is a policy choice. We can have the growth we want if we put the policies in place that create the growth. We've chosen not to do that for a long time. Now we've chosen the opposite. So we're all going to find out what happens.

BRIAN SOZZI: Myles, I suspect you can appreciate this. Yesterday, I talked to a few folks on the sell side, analysts. And they're already starting to think about raising their 2022 earnings estimates, in large part because of these wage increases. And, number two, because of these wage increases, it may give consumers more impetus to spend, what, over $5 trillion in savings that they have amassed during the pandemic. So it's interesting to hear how Wall Street is thinking about these inflation gains.

JULIE HYMAN: Although if they're getting higher wages, maybe they won't need to tap into their savings quite as much because they'll be earning more money in an ideal world. Well, I don't know. We'll see how it all plays out. But it's definitely an interesting trend to continue to watch. And I look forward to reading more in the brief about it, as Myles's thinking continues and evolves on this.