Unemployment Is High. Why Are Businesses Struggling to Hire?
nytimes.com
nytimes.com
- We have seen approximately 1/10th the amount of applicants as compared to our hiring prior to Covid.
- We have reached out to 50+ people via the hiring platforms i.e. Indeed recommended candidates, with a very limited response rate.
- Of the 6 people who a) applied for our job AND b) responded to our requests for interviews, only one has shown up for their scheduled interview. He was immediately hired.
- The single hire we made, for $14/hr as a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer. I assume they are increasing their hourly rate due to 1) lack of talent seeking jobs or 2) large influx of cash from PPP2.
- I had three scheduled interviews, and all three were no shows, sending messages of cancellation either 10 minutes before, or not at all.
- I reached out to all three of those after their missed interview times, and two have rescheduled their interviews for. Typically, we would not entertain a no-show like that, as dependability is critical on a small team, but we are not in a position to be picky. (I'm curious if it is possible to use these scheduled interviews in fraudulent claims of seeking but not finding work. We literally hired the one person who came in.)
- We have had job postings on Indeed.com, Craigslist.org, and Facebook for the past 3 weeks - as well as leveraging our website and social media posts.
- Our current team of 6 other people are all hires from before Covid.
Say you pay 25$ an hour, but it's only 8 hours a week during peak ?
I think with the gig economy young people are used to only working when they want.
I live in a 50k poulation town, and $14 is not a living wage.
What do you think 'market rate' means? If you aren't able to hire for $14 but someone else is for $18... then $14 is clearly not the market rate and $18 is. That's what a market rate is - the rate things are selling for in the market.
If someone can Doordash, etc, and make more( while arguably dealing with less stress) they'll rationally do that.
Or since this is HN, can you automate some of these tasks ?
Imagine if instead everyone wanted to work at your restaurant, EVERYONE, you'd fire your 6 guys and pay $2 their replacement, no ?
Doesn't that maybe suggest that $18/hr is probably the current market rate then? My understanding of market rate is "amount at which the two parties are willing to negotiate", not "amount that the employer wants to lock in at, all other factors be damned"
If one can't afford to pay competitive wages, that may suggests they're not actually financially healthy enough to stay in business.
What I'm wrestling with is whether this is utopian or dystopian? That's why I say it's an "interesting" idea. I can see it appealing to some people and not appealing at all to others. Maybe there's room for both kinds of people in the labor market? Your "base" workers who are always there and reliable and the "peakers" who are taking care of your excess load at peak times?
https://www.snagajob.com/ I imagine it depends on your situation.
If I was 19 I'd love it. I'd hate living like this with a family to support
By the time it reaches ground level nothing left but crumbs
There is no way out. Get out of debt and hoard as much as you can. Bad times are coming.
Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.
For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.
So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.
In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.
The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.
Exactly
If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset
If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.
If rates go down those $1,000 can now pay for a higher list price
"The market can stay irrational longer than you can stay solvent".
"When the music plays, you have to dance."
I'm just suggesting not to speculate with borrowed money.
The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.
Vacant Housing Estimate - https://fred.stlouisfed.org/series/EVACANTUSQ176N
So, looks like closer to ~11% as of that data.
How you work that into your business plan is harder, but you need employees for the business plan to work as all, so it still boils down to "pay them more".
Sure this small bar could literally pay more but if that means their business model doesn’t work then that probably means many small bars/restaurants business model won’t work in the area (unless they have old/low rent). So does that mean you’re ok with all small places being replaced with TGI Fridays?
But the 10% that succeed, are succeeding in the same environment as everyone else. They do so by offering food and an atmosphere that people want, and that you don't find in another restaurant in the area, even though the price is higher (significantly higher than TGI Fridays). Sure, there's also a good bit of luck involved, but that's hardly unique to starting and maintaining a business.
And what else would you suggest? Forcing people to work for $14? Prevent them from being sniped by other businesses for more money? They're already getting loans from the government to hire more people...
It’s even more true with little apps on the App Store. Most tiny little apps actually hurt the Apple experience because they are unworthy and don’t have the reputation but still want your data.
Small shops don’t economically make sense except for very local concerns.
Labor has been forced to operate under the same rules for decades now. Don't like the minimum wage? Then starve. Or figure out a way to provide more value. A dozen other people will be desperate enough to take it. I've zero sympathy for business owners being held to the same forces.
It's not sustainable? Pfft you think anyone else is magically getting cheaper? Raise your prices and cut your overhead, welcome to the game.
I don't think these guys understand what "market rate" means.
Whether that is “sustainable” for your own cash flow was never the point.
Simply put, the market is what determines the wage employees will stick around for. The free market doesn’t give two shits about what any employer thinks is an “appropriate wage”. If you are offering $14/hr and employees are jumping ship after their fourth day for $18/hr, no amount of complaining and bellyaching about that not being “sustainable” will change things.
Tighten that belt and make cuts elsewhere - like your own take-home, which if it’s an industry standard, is likely several multiples of that employee’s wage in order to finance a McMansion on the hilltop and a Mercedes in the garage.
Remember - if you cannot afford to pay a living wage, you cannot afford to be in business. Asking people to work below poverty wages so you can own a business is entitlement at it’s finest: you are asking human beings to use their lives to subsidize your desire to own a business. If a job is worth being done, it’s worth being paid enough to live.
Yes, it does. Someone is making easy money on the backs of people who can't afford to live.
When I was in high school I worked as a busser/dishwasher for a diner. I'm assuming you're in a high CoL state but what you are offering is above what I was paid after adjusting for inflation.
I personally know at least 2 people that admitted this and said they would wait until unemployment benefits expire to seek work.
Yes, you can restructure income tax levels so that people get to keep most of their additional income, and then you'd have to tax the remaining people more heavily to compensate. But if that's the solution, why don't we do that today?
This argument shows that UBI doesn't solve the incentive problem. It can only be solved by keeping welfare benefits significantly lower than minimum wages, which means lowering one or raising the other. This isn't logically impossible, but it's matter of political feasibility. That's true of UBI also.
I do think it's important to point out though that you lose unemployment if you work, so there's direct incentive there.
A UBI that works as e.g. a negative income tax would definitely work.
If UBI just replaces unemployment, how does that calculation change? You still have enough money to live on you still don't want to do the job being offered?
Unless UBI is sufficiently low that you need a job to survive, in which case... is it UBI?
You stop getting the benefit if you get a job, you wouldn't stop getting UBI, so there's no negative response to being employed.
The thing that people seem to forget is how higher AGI = higher taxes. People are just getting back some of what they’ve paid into the system already. Would you expect to get full coverage insurance on a new Ferrari, with premiums based on the value of that, then get compensated by the insurance for the value of the cheapest car on the market in the event that it was stolen?
Edit: minor typo
OP's question was "why don't you pay more? That will make people want to leave unemployment". My response was "higher wages will not incentive people to leave unemployment because they would be receiving unemployment that scaled with those higher wages".
If you have a chain of A owing B $2k/mo and B owing C $2k/mo and so on from A to Z, then if A through Y's sectors all change, Y still needs to pay Z, meaning X needs to pay Y, mean W still needs to pay X, and so forth. Meaning that even though nobody's paying usury rates, nearly everyone is still heavily constrained in terms of how they can adapt to change. And so they're incentivized to push the world towards whatever scenario they planned for, not because they like that scenario a priori, but because that's what they planned for.
tl;dr Credit lets you play time arbitrage, which sets up bad incentives when things don't go according to plan.
We shouldn't have chains of people owing money to each other, we've seen what happened in 2008. Prohibiting lending money with interest will not allow such chains to form.
In the US, there are also places where the minimum wage is $7.50 (the federal minimum wage) and things also cost far less. The US in general is a much more diverse place than a place like Switzerland, and yet it’s all governed by the same federal law, which paid expanded unemployment benefits the same regardless of where the person is located.
The average US small-business owner makes around $70k/year, less than most devs: https://www.cnbc.com/2020/02/28/this-is-how-much-to-pay-your... . It's not like small business are rolling in cash. The only way for them to pay more is either to raise prices (meaning everything costs more) or hire fewer people. Would you be willing to patronise a shop that charges 50% more for coffee than the shop next to it because it pays its workers more? I'd bet not.
Switzerland is a very rich country, so all wages are higher; shops can afford to pay more.
I'm not a business owner, but from a customer's point of view, I regularly settle on my favorite stores for reasons other than price. As long as it's not exorbitantly priced (e.g., $8 coffees in a small city), I prefer places that have good atmosphere, offer quality products and service, and become part of the community. A coffee shop that displays and sells works from local artists is better than a Dunkin Donuts.
My wife chooses where to shop and eat by price, and I hate it. We end up saving some money but often not enjoying it (cheap batteries that need frequent replacement, foul-tasting marinara, etc.). No matter how thrifty we were, I just see it as paying to be less happy.
Why do you think people shop at stores like Publix or Whole Foods when Walmart has lower prices? Because those stores (even though they still treat their employees--sorry, "associates" poorly) have better service, due to better pay.
There is a market for McDonald’s coffee as there is a market for $20/cup coffee.
If we're living in a world where prices are inelastic, then labor supply will also become inelastic. Presuming that successful businesses aren't trying to hire for the sake of hiring, then it's almost certain that they are raising prices to meet demand.
So they just import and abuse poor workers from Eastern Europe[1] living and working in illegal conditions, who have no better options back home than to do back-breaking work for what would be peanuts in Germany but somewhat-half-decent money back home.
The local authorities know about these illegalities regarding foreign worker exploitation but turn a blind eye as this keeps the meat and vegetables cheap in the supermarkets for the very price sensitive local consumers, since the farmers are all under the pressure of the big supermarket chains to deliver produce on time and on razor thin margins so they have no other way but to find cheap exploitable workforce to stay competitive or lose their contracts.
Welcome to 21st century European capitalism.
I think you wouldn't. A family member runs a small shop and unemployment plus additional COVID benefits ended up being very close to wages of some employees, who did the math and decided that 90% of the pay for 5% (not zero due to expectations for unemployment) of the work.
There’s a good article somewhere that looks into that specific question and provides some data and weighs alternative explanations. I wish I could find the link.
Alternatively we could all just debate it without any of the data from the article. I’m pretty sure I know which option is most popular.
If you increase the amount of money provided to people who aren't working then you change the cost benefit analysis of working a wage job.
The end game is higher prices at service businesses to allow them to pay people a higher wage to attract them.
A positive side effect I've noticed is that high school kids are getting hired in droves at local restaurants here.
Giving so much cash with no other consequence than the "rich" taxpayers footing the bill one day maybe, is not gonna motivate the restauration workers who usually worked by necessity, not passion.
Personally, what rings most true is the quote in the article about the virus being the first order issue. It seems much more common sense that the hiring challenges at the (hopefully) end of the pandemic are related to the fact that it’s still a pandemic.
Here's a radical concept: wages are too low. People aren't applying to your job because you're not offering enough money. Pay people more.
You claim to believe in a free market, then complain when nobody wants to work for you for starvation wages.
And given the avarice of corporations and the negligence of our federal government, it won't be getting better.
Granted, if enough of these shops then go under, the supply of jobs will decrease, and then the wages will drop (and many other market effects). Capitalism isn't even close to a perfect system for allocating these resources, but it does seem to be one of the best we have found thus far.
But to answer your question, yes I would. I voluntarily tip well above the amount you’re describing at every restaurant I eat at for this exact reason.
If a coffee shop can’t sustain livable wages, there are a ton of moving parts that could adapt. I imagine the problem is credit. It’s artificially hard to lower that shop’s rent because the landlord still has to deal with their mortgage price (and so on around the whole economy).
I do not believe that this situation truly exists, so this argument falls apart for me.
Also: many people are willing to pay more for “Made in USA”, even significantly more. Sewing and textile work is definitely more expensive here, and sometimes comparable quality can be found through overseas manufacturing (e.g. Arcteryx, Mystery Ranch). There’s room in the market for both, and the products are different enough for reasons other than some are MIUSA and others are not.
In other words, breakfast and coffee are not fungible commodities.
For some, unemployment benefits too generous. For some, they are worried about getting sick. For some, they're still needed at home For some, the pay too low to want to work. And for some, they're just reconsidering career decisions.
Add up all the "For Some" people, and that's probably a pretty big number.
And that's as it should be, I concur. Nobody should be customer-facing right now, we should all be locked down, these people should not be considered unemployed.
$25 an hour is great for a lot of people, but if they only pay you for 10 hours a week that isn't great after all.
For 50/hr -- yeah maybe. I'll be bored as shit and living in a shed, but that's decent money. But for 25/hr? Screw that, I'll pick up a side job here or something.
- Stimi checks
- Unemployment benefits
- Migration from high crime/tax/rent areas
- Preference (at present) for remote work/gig jobs
- Malinvestment by USGOV/Fed in support of debt/equities/assets, instead of production of goods, infrastructure and critical services. This drives investment & job seekers to speculative industries, at the expense of core industries.
Now put yourself into the position of someone who is only able to find work that doesn't pay well and is susceptible to emergency measures. Working full time may allow them to put a few dollars aside, but not much. When they find their hours cut back to 60%, there is nothing to protect them.
There are a couple of ways to respond to that. One is to put very little effort into applying for desperation jobs. Another is to continue looking for a more secure or better paying job while working. This was a problem in some sectors prior to the pandemic. It has only been made worse because of the pandemic. That being said, I suspect it is worse due to the heightened sense of insecurity rather than government benefits.
EDIT: clarification.
It's easier for her to work towards Master Electrician via courses than it is to actually get any random job. Her unemployment + COVID boost + schooling stipend + insurance payout makes enough that she'd probably make less at a shit-tier service job.
Why bust your ass for 10% more, when you can focus on skilling up and getting back into EE or waiting for a better job? Plus she works out like an hour a day, practices piano 3+ hours, and has time for schooling.
Outside of failing to meet someone else's implied capitalist strivings, I can't see the downside of this approach.
Surely the social safety net is to blame.
edit: I don't write this as a negative. Majority of people agree with such system and there is nothing wrong with that.
I don't know why hacker news still allows articles with paywalls.
I'm not so sure we can compare the impact of temporary changes to the goals that proponents of UBI have set out.
I suspect there's going to be significant pressure to wind back expansions and allow temporary programs to sunset. And it'll be hard to argue to keep them once vaccine access is high, schools are open, and things can "return to normal."
Not working at a time when you have access to significantly increased unemployment funds and in the middle of a pandemic is an extremely rational decision, but I suspect it is not how the long-term would look.
It is a great thing when government forces businesses to pay living wages. We can hope and wish for them to do it themselves, but it just doesn't happen otherwise.
1) Indoor work is still unsafe, which is messing with the labor markets and making it hard to start a new business
2) If you get a job or side income you lose your benefits
3) The benefits are temporary so you can’t plan around them.
But anecdotally my fiancé was able to start a small business during the pandemic. And unemployment benefits helped.