It is early May 2012 and my news and Twitter feeds are filled with the many corporate calls for an end to supplemental unemployment benefits that were offered in response to Covid-19 (you can learn more about that here) Arkansas, Montana and South Carolina have already taken measures to end the supplement https://www.cnbc.com/2021/05/07/montana-south-carolina-ending-participation-in-fed-unemployment-programs.html.
The following article calls this supplement a “perk” which is a misnomer. “Course correction” or “earned entitlement” might be more appropriate. Perhaps something to do with survival or even living wage.
These stories suggest that the current labor shortage is a result of this unemployment supplement. It is simple, really. Many American workers can make more money from unemployment than from working for minimum wage. Therefore, they do not reenter the workforce. I consider this smart economic decision making on their part-the payoff of financial literacy.
Calls to eliminate the unemployment supplement is essentially saying “I want to return to underpaying my employees.” I want to compel/incentivize them to work for me. I am reluctant to paint all employers and business owners this way. I am mainly concerned with the Amazons and Bezos’ of the corporate world, those who lobby to depress wages, not your local small business owner. Like most economic issues, the problem is systematic disguised as individualistic. That it is such a struggle to make a living in America and that many businesses, even large corporations, seem to operate on hairline margins is a consequence of a host of issues including neoliberal policies, deregulation, and our subsequent accustomedness to underpaying for food, among other things.
Most threatening of all is what the unemployment supplement normalizes; a living wage and the possibility of equal* pay for the historically and chronically under-mis-and-inequitably paid (e.g. women, BIPOC). In doing this it ups the ante, creating competition for the purchasing of human labor that corporations do not want.
*Equal here is decontextualized and simply refers to gross pay. It could be argued that pay, while perhaps equal, is not equitable.
This shortage reveals what has long been (not-so-well) hidden from public view and popular layperson economic discourse. These revelations are discussed below. It should be noted that “work” and “workforce” here refers to work that is recognized, paid and revenue-generating. It does not include the many forms of uncompensated work performed largely in the home and disproportionately represented by women (e.g. childcare).
The corporate and legislative solution to the labor shortage is to coerce workers to work for minimum wage by ensuring they are unable to meet their needs and thus desperate enough to reenter the workforce. Essentially, to starve them into submission.
Below are the things I think this labor shortage/calls to end the supplement reveal and the lessons we can learn from this economic event.
1.) The desperation for workers reveals that human labor is the real source of corporate profit. Adam Smith and Marx both saw labor as the source of value creation. Prices for commodities reflected, or at least acknowledged the costs of labor, to greater or lesser degrees. Since the marginalist revolution (see my post on rethinking needs and wants), value and price are not based on labor or utility (use-value) but on supply and demand (i.e. whatever people can be compelled to demand and to pay). It is possible for a CEO to make 100x what their lowest paid employee makes because they can and do. Apply the same concept to the price of epipens and the actions of “pharma bro” Martin Shkreli. They do because they can and they can because they do. The problem with human labor is the human. If it is acknowledged that human workers create value humans might demand to be compensated. Furthermore, humans have bodies. Bodies are messy; they present problems. Mainstream, neoclassical economics maintains its power through disembodiment.
2.) The labor shortage prompts us to rethink the current veneration and privileging of “job creators” in American economic and political discourse from both sides of the political spectrum (see my post on job creator rhetoric). Jobs there might be, but salaries and living wages there are not. What does this say about who or what should be lauded or what terminology should be used instead? Who really creates jobs? Salaries? See my discussion of this in my “Tip of the Iceberg” article and in my book review/explanation of Modern Monetary Theory
Federal support might prompt people to see government as helpful. An economic rhetoric that believes in privatization and small government cannot have this.
3.) A federal supplement to workers is nothing new. In order to work, human beings have to live. To live they have to have the basic necessities needed to support life. The government has long supported/subsidized corporate death wages through federal welfare programs like SNAP, housing assistance, and Medicaid. Federal support becomes a problem when its support acts as a corporate competitor for human labor rather than co-conspirator.
4.) If the laws of the market are real, then they apply to capitalists, too. Capitalists might have to practice what they preach and act in response to supply and demand. Raising prices reduces shortages-this is the stance taken by organizations like the Foundation for Economic Education (FEE), who propose that disaster price gouging is ethical. Here is what they have to say about that;
Referring to rising prices as “price gouging” will not change the economic fact: in a free economy, prices are a vital signal to producers and consumers alike. It’s incredible that a single number can do so much.
This is the miracle inherent in free markets—no solitary, all-knowing authority is dictating the direction of prices or production in a single market (let alone an entire economy). It happens naturally, as if led by an invisible hand.
The FEE suggests that when there is a shortage of a commodity like toilet paper, the solution is to increase price “A higher price makes consumers think twice before buying a cart-full of toilet paper, leaving more product on the shelves and limiting or delaying, perhaps indefinitely, any shortage”. This was also the organization’s proposed solution to water shortages after the hurricane in Houston.
Raising the price of necessities is apparently more palatable than other measures, such as rationing;
But think about the incentives of business owners—do you know a single entrepreneur, business owner, or honest employee who wants to intentionally upset their customers? The incentive of business owners is always to provide great service and reasonable prices. To act otherwise is to eventually run out of business.
For the sake of argument, let’s say that the mainstream economists are correct and market operates according to laws of supply, demand, incentives and scarcity. Like toilet paper, human labor is sold on the market. What should businesses do if they are experiencing a worker shortage? Raise prices, that is, salaries to attract workers. That solution only seems acceptable when it is about goods, not labor. If human labor is bought and sold on the market, then that means employers have to price competitively. This is one of my reasons why corporations like Walmart or Amazon would be threatened by other businesses raising wages-it creates unwanted competition for the best workers and might put pressure on them to raise their workers’ wages in response. The same goes for government. The Federal unemployment supplement ups the ante for corporations, incentivizing them to price match (pay more for labor).
These are very simple thoughts on a complex issue. My hope as always is to prompt critical thought and offer new vocabulary about the economic issues that concern all of us, especially those in the public discourse (see forthcoming article in Social Education). I don’t have all the answers, but I hope what is written here can help people start asking different questions.
More to Read:
-Covid destroyed the illusion of the restaurant industry https://eoinhiggins.substack.com/p/covid-destroyed-the-illusion-of-the
-It’s not a labor shortage it’s a reassessment of work in America https://www.washingtonpost.com/business/2021/05/07/jobs-report-labor-shortage-analysis/
-The consequences of job displacement
-What is jobs are not the solution but the problem?
-Pavlina Cherneva The Case for a Job Guarantee FAQ
-Republicans calls the unemployment boost a disincentive to work: Many experts disagree https://www.cnbc.com/2020/08/03/is-600-unemployment-boost-a-disincentive-to-work-no-economists-say.html