June 12, 2021


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Will Labor Shortages Give Workers More Power?

Will Labor Shortages Give Workers More Power?

It’s been argued that technology (especially automation) will continue weakening the position of workers. But today the senior economics correspondent for The New York Times argues a “profound shift” happening in America is instead something else.

“For the first time in a generation, workers are gaining the upper hand…”

Up and down the wage scale, companies are becoming more willing to pay a little more, to train workers, to take chances on people without traditional qualifications, and to show greater flexibility in where and how people work. The erosion of employer power began during the low-unemployment years leading up to the pandemic and, given demographic trends, could persist for years. March had a record number of open positions, according to federal data that goes back to 2000, and workers were voluntarily leaving their jobs at a rate that matches its historical high. Burning Glass Technologies, a firm that analyzes millions of job listings a day, found that the share of postings that say “no experience necessary” is up two-thirds over 2019 levels, while the share of those promising a starting bonus has doubled.

People are demanding more money to take a new job. The “reservation wage,” as economists call the minimum compensation workers would require, was 19 percent higher for those without a college degree in March than in November 2019, a jump of nearly $10,000 a year, according to a survey by the Federal Reserve Bank of New York… [T]he demographic picture is not becoming any more favorable for employers eager to fill positions. Population growth for Americans between ages 20 and 64 turned negative last year for the first time in the nation’s history. The Congressional Budget Office projects that the potential labor force will grow a mere 0.3 to 0.4 percent annually for the remainder of the 2020s; the size of the work force rose an average of 0.8 percent a year from 2000 to 2020.

The article describes managers now “being forced to learn how to operate amid labor scarcity… At the high end of the labor market, that can mean workers are more emboldened to leave a job if employers are insufficiently flexible on issues like working from home…”

But it also notes a ride-sharing driver who switched to an IBM apprenticeship for becoming a cloud storage engineer, and former Florida nightclub bouncer Alex Lorick, who became an IBM mainframe technician, “part of a deliberate effort by IBM to rethink how it hires and what counts as a qualification for a given job.”
[IBM] executives concluded that the qualifications for many jobs were unnecessarily demanding. Postings might require applicants to have a bachelor’s degree, for example, in jobs that a six-month training course would adequately prepare a person for.

“By creating your own dumb barriers, you’re actually making your job in the search for talent harder,” said Obed Louissaint, IBM’s senior vice president for transformation and culture. In working with managers across the company on training initiatives like the one under which Mr. Lorick was hired, “it’s about making managers more accountable for mentoring, developing and building talent versus buying talent.”
“I think something fundamental is changing, and it’s been happening for a while, but now it’s accelerating,” Mr. Louissaint said.

Read more of this story at Slashdot.