The Dichotomy Of The American Labor Market

If you were to listen to news reports, you would find what seems to be conflicting stories regarding American workers. There is a labor shortage and high unemployment. Workers are quitting their jobs in record numbers and others are unable to find a job. What gives?

During the Covid shutdowns, American workers were divided into two groups…those who could work from home and those that could not. This accelerated the trend of a two-employment economy which was already underway. There was very little disruption in income for those who could continue to work from the confines of their homes or apartments. Those who could not, which tended to be lower paid workers, had time to assess their employment and the amount they were being paid.

Low-paying industries such as restaurants and retail have taken the biggest hit in finding employees. Other sectors such as transportation and warehouse have also had trouble filling positions. Workers believe they should be paid much more than what was offered pre-Covid, and the market is adjusting.

There is nothing wrong with this occurring. Productivity and pay from 1940s to 1979 rose together. Since 1979 wages adjusted for inflation have increased by only 17.5 % while productivity rates have increased by 61.8%. Workers have been getting the short end of the stick for over 40 years.

Will we see unions more prevalent as they were in the 1950s and 1960s? I do not believe that will happen. Instead, market forces will adjust pay to…