A front-page article in the Wall Street Journal presents a fascinating mystery: Despite persistent high unemployment, some employers are having a tough time filling jobs.
“In Bloomington, Ill., machine shop Mechanical Devices can’t find the workers it needs to handle a sharp jump in business. Job fairs run by airline Emirates attract fewer applicants in the U.S. than in other countries. Truck-stop operator Pilot Flying J says job postings don’t elicit many more applicants than they did when the unemployment rate was below 5 percent.”
What gives? Employers these days seem taken aback when highly qualified, experienced people fail to rush to apply for the openings they post. The article supplies several possible explanations: For jobs that require specialized skills, there simply might not be enough qualified applicants; employees accustomed to working at higher-paying office jobs aren’t eager to take lower-paying jobs at truck stops and restaurants; some of the unemployed might prefer collecting a few hundred dollars per week in unemployment benefits, while they last, to working a job that pays $8 per hour.
But the Journal article seems to overlook one important factor. Even in an age of historic underutilization of the labor force, the laws of supply and demand apply. Hiring is a negotiation between employers and employees over the terms at which they’ll agree to come to work—wages, benefits, working conditions, length of commute, relocation requirements. Maybe some of these employers just aren’t offering terms that are good enough.
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 last year,” the Journal reports. Thirteen dollars an hour, 40 hours per week, 50 weeks per year—that comes to an annual salary of $26,000. (In the adjacent Peoria, Ill., metropolitan area, per capita income was $39,965 in 2008.) Or take Emirates Airlines. When it held jobs fairs in cities like Miami and Houston, only about 50 people showed up, “compared to a global average of about 150 and as many as 1,000 at some events in Europe and Asia.” The jobs don’t require much in the way of education, and they come with benefits, free accommodations, and a starting salary of $30,000. But you’d have to move halfway around the world, to Dubai—an alien and expensive place. Would you uproot yourself and your family for $30,000 a year? Don’t you think both of these employers would find many more interested applicants if they offered higher wages?
In the past few decades, workers have generally lost ground against employers in negotiating terms of employment. Defined-benefit pension plans have been replaced by 401(K)s, and then employers sometimes cut the matching contributions. A smaller percentage of private-sector jobs today come with health insurance, while many workers who have insurance have to pay more for it. Given globalization, the furious pace of mergers and acquisitions, and continuous cost pressures, job security is increasingly tenuous. And so the main thing employees—and potential employees—look at when evaluating their current jobs and potential offers is wages. And here, too, corporate America hasn’t been delivering. The median income in 2008 was below what it was in 1998.
In theory, given the high level of unemployment, huge numbers of enthusiastic, qualified workers should be flocking to all the openings that are available, even if the wages aren’t fantastic. In this kind of climate, you should accept the offer you get and be happy with it. And for many jobs, that might make sense. Going from making $80,000 after being downsized from a local law firm to making $70,000 at one in the neighboring office building might be a bummer but would be manageable. Taking a 15 percent pay cut to stay on at the restaurant that just went bust might make sense. But the labor market isn’t a perfectly efficient one. Most companies, especially small ones, hire from local labor pools. And if you’re in an area where the population is stagnant, declining, or aging, the numbers may be working against you. If jobs require people to commute a great distance or to move themselves to another state, or to another hemisphere, employers may find they need to sweeten their offers.
