- Treasury Secretary Yellen said the labor shortage is incentivizing employers to pay workers more.
- Since higher wages can trigger price increases, the situation should be monitored, she said.
- Yellen previously said the end of the pandemic will bring people back but even then workers may not want to return.
Treasury Secretary Janet Yellen says that the current labor shortage is forcing employers to pay their workers more — and that’s mostly a good thing.
“We have labor shortages, and it’s beginning to put upward pressure on wages,” she said virtually at the Reuters Next conference on Thursday. She said that they’re seeing the changes to worker pay already, but that such increases “can take awhile to get into place.”
That upward pressure on wages is “to some extent good,” she said, but it can also trigger further price increases that should be monitored. She offered that wage and price changes would be the variables that determined whether or not the U.S. economy is “overheating.”
The Treasury Secretary doesn’t see cause for concern yet. She doesn’t anticipate that wage increases are going to raise inflation more.
Currently, inflation in the US is at a 31-year high, making food, energy, cars, and household supplies more expensive for Americans. People of color, rural households, and families without a college graduate have been hurt the worst by these price hikes.
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cannot influence the supply-chain factors responsible for these higher prices, Yellen said. Lowering trade tariffs imposed during the Trump administration would help price pressures, she said, but not significantly.
Yellen has previously attributed the labor shortage to the coronavirus, telling CBS News last month that the labor supply will revert to normal after “we really get control of the pandemic.”
At the time, Yellen pointed out several reasons for the shortage, saying that an “abnormally low” supply of labor, including a shortage of childcare workers and teachers, creates childcare barriers. She also said that people in public-facing jobs would likely have concerns about COVID exposure.
People are quitting for other reasons — namely, they’re not willing to compromise at work
2021 continues to see record numbers of workers quitting. According to the most recent data from the Bureau of Labor Statistics, 4.4 million Americans, about 3% of workers, voluntarily left their jobs in September. That’s up from 4.3 million in August and 4 million in July. These are the largest mass resignations the US has seen in the two decades since the government started documenting them.
To describe this phenomenon, Texas A&M psychologist Anthony Klotz coined the term “the Great Resignation” in May.
Marty Walsh, President Biden’s Labor Secretary, echoed Yellen in attributing the job shortage to logistical concerns of the pandemic when speaking with Insider in October.
Additionally, however, he suggested that people are simply rethinking their lives outside of work.
“I’ve talked to a lot of businesses that have said some people have just decided to walk away from the industry they’re working in, and they’re thinking about what’s next for them,” Walsh said. “So I think that the work-life balance has played a big role in this.”
Yellen and Walsh’s explanations for the labor shortage show that Americans are becoming less willing to compromise — and are starting to take their employment destinies into their own hands.
They’re doing that, for instance, by starting their own businesses. The number of unincorporated self-employed workers has increased by 500,000 since the beginning of the pandemic, Labor Department data revealed this week. At about 9.44 million workers, that reflects a 6% increase in self-employed people during the pandemic, while current unemployment levels stand at almost 3% less than they were.
Entrepreneurs applied to register 4.54 million new businesses from this past January through October, an increase of 56% from the same period in 2019, Census Bureau data shows. That’s the largest figure on record, which the Census Bureau has up to 2004.
Given those numbers, whether the end of the pandemic means a complete reversal of the labor shortage isn’t a sure thing.
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