Show Me The Money
By Wes Leatherman
Pretty much everywhere you look there is a “Now Hiring” sign. Business is booming for employers in Frederick County. So much so that many companies are unable to take on more business without hiring more help.
The good news? Society is clearly starting to become more active, as more and more people become vaccinated, which translates to people coming out of their homes. However, people do not seem to be coming out of their homes to go to work.
Has the pandemic caused a demand for increased wages?
Initially, we attributed the labor shortage to fear of the virus, unemployment benefits, and parents being stuck at home with their children. Some of these theories may still hold true. Maryland’s Work Search Requirement was temporarily lifted in March 2020, but in the coming weeks, anyone who is still on unemployment will be required to start looking and applying for work. In reality, this requirement does not always translate to people actually going back to work. It simply means they need to be actively searching and available for work. Available is the “key” word here, as many parents are still stuck at home with the children. Recently, school systems have started to bring students back in some capacity, but not on a full-time basis. Also, the school year is all but over, which means kids will be back at home for the summer.
All that said, several articles have been surfacing, as of late, stating that the labor shortage is actually a myth. For a while now, businesses have been saying that the labor shortage is due to people staying on unemployment. In the article ”Unemployment benefits aren’t causing a labor shortage. Low wages are.” you will find a different perspective: People are ready to get back to work, and there is plenty of talent to go around. Ok, then – where are they?
“When a company is struggling to find enough labor, it can solve the problem by offering to pay a higher price for that labor — also known as higher wages. More workers will then enter the labor market. Suddenly, the labor shortage will be no more.”
The conclusion from these articles is that employers need to show the money. Job seekers are holding out for more pay. It is tough to make a living on $7.25/hour (Federal Minimum Wage) or even $11.75/hour (Maryland Minimum Wage). How many people do you honestly know that are earning wages at this level? Sure, they could become more educated or acquire new skills…if they have the free time and can afford to do so. Maybe they work more jobs. However, even if a Marylander were to somehow work two full-time jobs, that would equate to less than $48,000 a year, after taxes. With the average home in Frederick County costing over $360,000, even a household of two, using the above numbers, would struggle to afford this American dream.
Inflation 101
We know that supply and demand can cause the price of goods and services to increase. Businesses then raise wages to offset the price increase. This is a slippery slope because when businesses pay higher salaries, oftentimes, that cost is absorbed back into the goods and services. Unfortunately, wages have grown at an all-time slow pace and have not caught up to a level that offsets the current inflated prices.
Reality Check
The reality is that more and more businesses will find the wage competition heating up as big corporations push the needle. Chipotle has already made their starting minimum wage $15 an hour. Another competitive threat businesses may not be considering (especially for the younger generations and immigrants) is companies like Doordash, Uber, and Lyft. These companies provide workers with a bit of autonomy and flexibility; instead of the feeling you are “working for the man.” All while being paid anywhere from $20-25, on average.
It is hard to say what the right answer is. For a small business, it is incredibly hard to be competitive by increasing wages. Also, do we continue to raise wages and then prices…repeat and let that vicious cycle take hold? There has to be some balance. We certainly do not want everything to be dictated by corporate America. In the same breath, wages need to be relative enough to make the American dream tangible.
Closing point
Show me the kids returning to school, full-time. If low wages are in fact keeping people at home and away from the workplace, this will be the key indicator. With this change expected to take place in August, there should be an influx of people returning to work shortly thereafter. Otherwise, it truly is the workforce demanding higher wages.