Why Is the Journal Mystified that Some Employers Are Having Trouble Finding Workers?

The Wall Street Journal seems truly mystified that with headline unemployment at 9.5% and U6 at 16.5%, some employers are nevetheless having trouble filling jobs. But this shouldn’t seem all that strange when you consider that workers are not an undifferentiated mass, but have particular skills and experience, and live in particular places, and they may not always match up tidily with where employers are and what they are looking for.

The subtext of the piece, however, is that a major culprit is that workers are being too fussy and are not willing to accept what is on offer:

Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.

The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can’t qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops…..

If the job market were working normally—that is, if openings were getting filled as they usually do—the U.S. should have about five million more gainfully employed people than it does, estimates David Altig, research director at the Federal Reserve Bank of Atlanta. That would correspond to an unemployment rate of 6.8%, instead of 9.5%.

Yves here. Go back and look at the list of why some jobs go begging. The Journal lists three reasons, but there are really only two: employees are not willing to take whatever is on offer (either due to still having unemployment benefits or believing they can find higher-paid work) or due to inability to move where jobs are. Note these problems all have to do with workers, there is no consideration as to whether employers are contributing to this dynamic. For instance, note how the story suggests that workers will need to trade down. Yet many employers turn down job-seekers because they are overqualified.

Yet one can think of reasons why, and the article itself provides some supporting evidence. A core issue is that the employer-employee relationship has broken down. Quaint as it may sound, there once was a tacit commitment: a worker who competent and dedicated could expect to spend a considerable amount of his career at with one firm (in the 1980s, job tenures of less than five years needed to be justified). But as cost cutting and short term earnings fixation became more pervasive, average time of employment shortened greatly. And with that came a major shift in behavior: it made less and less sense for employers to hire talented people with good general competence and character and train them. They’d be unlikely to recoup the cost of the investment. Instead, companies started more and more to seek staff, in that horrid corporate cliche, who could hit the ground running. For instance, headhunters would increasingly be tasked to find someone who was doing exactly the same job at a competitor firm. This tendency goes all the way down the food chain; for instance, I’m told it’s impossible to become a bartender in NYC unless you have at least two years of bartending experience.

Now what does this mean from a price standpoint? If you believe in the most basic construct in economics, the supply and demand curve, if you restrict supply (by requiring that workers have very particular skills), the result is a higher price. Yet some employers seem to think because the economy is in the crapper, they should be able to hire cheaply. But 16.5% unemployment nationally does not necessarily mean 16.5% unemployment in their geographic and skill niche. One example (the article is almost entirely anecdotal):

But other employers with lots of applicants say the pool of qualified workers is small for specialized jobs. Carolyn Henn, head of hiring at environmental consultancy Apex Companies, says she recently received about 150 applications for an industrial hygienist job paying as much as $47,000 a year, which requires special certifications and expertise to oversee projects such as asbestos cleanups. That is about three times the amount she received for similar jobs before the recession. But she says the number of qualified applicants—about five—is less than she got before.

“We’ve always been looking for a needle in a haystack,” she says. “There’s still only one needle, but the haystack has gotten a lot bigger than it was before.”

So an employer who is having a hard time hiring needs to consider that the generally slack labor market may not be relevant to his market, and he therefore may need either to change work processes so as to require less specialized labor, train workers, pay more, or do without. We see some of that at work in the story:

At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is “the key limitation to the growth of our business and to meeting our customers’ expectations,” says Mr. Sperry. He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs.

Trips to several job fairs yielded almost nothing, so the company set up a 10-week training program to create its own machinists. Out of the first group of 24 trainees, 16 made it to graduation.

Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company’s hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks.

Yves here. This does not add up. If the company can afford to spend ten weeks training people (and the additional cost of setting up a course), that suggests it could have offered more than $13 an hour, particularly given the opportunity cost of the orders it could have filled if it had had people on board sooner. The article later notes that Mechanical Devices “hire[s] through staffing agencies to help control health-care costs and maintain flexibility.” Um, that means they fire people as soon as orders fall.

Other employers seem not to recognize they are lowballing:

Paul McNarney, owner of The Mower Shop in Fishers, Ind., says he has been looking for a good lawnmower mechanic so he can guarantee a one-week turnaround on repairs. He received only two responses to an Internet ad he placed a couple of months ago, even though the job can generate income of more than $40,000 a year, depending how many mowers the mechanic repairs. Similar ads he placed before the recession attracted more than a dozen candidates, he says.

“My thought was that in a cr— economy I could probably find somebody good because a lot of people were looking,” says Mr. McNarney, who has been in business for 13 years selling everything from simple lawnmowers to big riding models for large properties. “I didn’t find anybody.”

Yves here. Let’s see….McNarney apparently already has a repairman; this “hire” is to shorten McNarney’s turnaround time. But this “job” appears to be paid on a piecework basis, on referrals from McNarney, and this new worker probably only would get work at a few peak times a year, since the current repairman is presumably top banana. So the $40,000 number is pure BS.

In fact, the logical response to that ad would be to compete with McNarney, not work for him. Why let him take the markup on your time for erratic referrals, meaning no job security? But the subtext of the article is that the buyer, meaning the employers, is always right.

Originally published at naked capitalism and reproduced here with the author’s permission.