[HN Gopher] The labor shortage is the catalyst for sustained inf...
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The labor shortage is the catalyst for sustained inflation
Author : vvarren
Score : 22 points
Date : 2021-08-19 21:00 UTC (2 hours ago)
(HTM) web link (warrenbisch.medium.com)
(TXT) w3m dump (warrenbisch.medium.com)
| Tarsul wrote:
| as always the real elephant in the room is that inflation is not
| bad per se, except for those whose wages don't grow as much as
| the inflation. And wages for low earners will rise. Thus, we are
| not really talking about inflation but more concretely about
| redistribution of wealth, only this time the low earners are
| getting more from the pie. Not the ones with the capital or the
| ones who don't work (anymore).
|
| As for America, this can only be good imo because the inequality
| has long been way too high. Nonetheless, I don't agree that
| America will see long and sustained inflation and there are
| things that will stay too expensive even with rising wages (e.g.
| healthcare) so these effects will probably be short-lived unless
| the government policies will change something more substantly
| (and with the new stimulus packages coming, it could happen).
| wobbly_bush wrote:
| > Thus, we are not really talking about inflation but more
| concretely about redistribution of wealth, only this time the
| low earners are getting more from the pie.
|
| Can you elaborate on how it is redistribution of wealth for low
| earners? Genuinely curious.
| reccanti wrote:
| A labor shortage = an increased demand for labor. If that
| labor can't be purchased at the current market rate, then
| they'll need to spend more on labor (increase wages), which
| in theory would come out of the salaries and benefits of the
| higher ups.
|
| We'll see if that actually happens though. Articles like this
| are designed to stir up fears of inflation so that they can
| get people on board with policies to keep wages lower.
|
| EDIT: Saw the author's reply higher up. It sounds like this
| isn't their intent, but when the sound bite is "higher wages
| means more inflation", it collectively feeds into the "be
| afraid of inflation" narrative that's been building
| wolverine876 wrote:
| I don't know this author, but the arguments that increasing wages
| will cause inflation, independent of their economic accuracy, are
| also perfectly tuned messaging for a specific group, the owners
| of businesses (and the high-level managers). That could be
| coincidence, but if the beneficiaries are paying attention - and
| that group is very sophisticated politically - it's probably not.
|
| Openly opposing wage increases for workers is political suicide,
| especially given the context of decades of flat wages and income
| inequality, and of the pandemic and essential workers, and given
| that it displays brazen greed and self-interest at the expense of
| the rest of the country.
|
| But if they convince enough people - not everyone - that wage
| increases cause inflation, while they also stoke fear of it
| (remember during the Great Recession, fear of inflation was a
| tactic against Obama's policies), they can reduce the wages paid
| and keep more profit. It takes convincing people not directly
| affected by the issue, such as white collar workers who are
| already highly paid (ironically) and retirees, which IMHO is easy
| and often done. It also takes convincing people directly affected
| that their own wage increase somehow harms them, or that they
| should sacrifice for the country; that's harder, but as we've
| seen, many people vote against their economic self-interest and
| even risk theirs and their family's lives for political
| movements. Remember, they don't need to convince everyone, just
| enough people.
|
| If inflation risks significant harm, and if wage increases are a
| significant factor (which I don't believe), I think suppressing
| wages is the last thing we should consider, if we consider it at
| all.
|
| Imagine if they said, 'SV company pricing is causing inflation'
| or 'wages in SV are causing inflation'.
| handrous wrote:
| > I don't know this author, but the arguments that increasing
| wages will cause inflation, independent of their economic
| accuracy, are also perfectly tuned messaging for a specific
| group, the owners of businesses (and the high-level managers).
| That could be coincidence, but if the beneficiaries are paying
| attention - and that group is very sophisticated politically -
| it's probably not.
|
| The narrative slants aren't even subtle.
|
| Asset prices skyrocket: "Look, the economy's booming! Hooray!"
|
| Wages go up somewhat: "Oh no, inflation! Watch out!"
|
| [EDIT] I mean for general coverage of these topics in the
| media, not picking on this particular author.
| vvarren wrote:
| I am the author and I appreciate your feedback. I actually
| wrote this piece to push back against the popular opinion
| that there's a labor shortage due to "lazy people on
| unemployment benefits". I don't view asset prices
| skyrocketing as a healthy sign of the economy booming,
| instead I view it as all the rich people shielding themselves
| before inflation sets hold. And my argument hinges on working
| class people being unfairly priced out of their communities
| due to the skyrocketing asset prices. I also make an argument
| against the Airbnbification of real estate and how it is
| hurting the majority. I apologize if it seems that I am
| supporting the capital-owning class but it is actually the
| opposite. Let me know if you have any suggestions to clear
| this up on my article. (Edit) thanks for the edit that clears
| it up. I was worried you thought I was pushing a narrative
| when I'm actually pushing back against the narrative. Cheers!
| nickff wrote:
| This comment makes it seem like you're using extremely
| motivated reasoning, and that any conclusions cannot be
| trusted.
| novok wrote:
| People like to hand wave airbnb as a boogeyman for real
| estate demand increases, but when you dive into actual
| numbers you find out it's less than %1 of units in the vast
| majority of cases. And buying houses to rent them out as
| 'revenue properties' has been around for a very long time,
| similar with airbnb style services in the 1800s.
|
| If a %1 demand increase causes big price distortions in a
| RE market, you have much bigger problems in your city than
| airbnb, which is usually linked to supply control via
| restrictive and often corrupt planning boards putting up
| large barriers that you have to 'pay to win' to get past
| under the table, as has been shown recently in SF.
| vvarren wrote:
| I am the author, and my argument is in no means against rising
| wages. In fact, I think it's about damn time that wages are
| rising. The $15/hr living wage movement has fought for this so
| long, that now $15/hour is barely a living wage anymore. My
| argument is actually that the economy is built on the backs of
| underpaid workers, and now that these workers are demanding
| their fair value we will either see inflation or the failure of
| many businesses. I don't believe a business should be allowed
| to survive if it can't afford to pay its employees a living
| wage, so if my argument implies that it is truly not my
| intention. Let me know what you think and if you have any
| suggestions to clear this up in my article.
| zz865 wrote:
| Maybe but most of the ruling class is more scared of deflation
| than inflation. Most of the last few years we've been fighting
| to avoid a deflationary spiral like the 30s. Any coming
| sustained inflation is a good thing.
| verall wrote:
| I agree with everything you said, but I don't think they just
| need to stoke fear, and I don't think the . Those white-collar
| workers and retirees want their maids and caretakers, their
| kids watched, their groceries bagged. And they want it cheap.
| Rising wages mean a direct increase in costs for this middle
| class.
|
| They want to say they don't want to pay their maids more
| without saying that their maids don't deserve more money.
| xienze wrote:
| > Imagine if they said, 'SV company pricing is causing
| inflation' or 'wages in SV are causing inflation'.
|
| Not sure I follow where you're going with this -- are you
| suggesting SV salaries aren't causing inflation in the local
| area? They absolutely have kicked off an inflationary feedback
| loop in SV real estate.
|
| * Pay tech workers more to attract them to SV.
|
| * Housing prices rise.
|
| * Pay tech workers more to compensate for higher real estate
| prices.
|
| * Repeat.
|
| Suddenly you find yourself in a situation where $400k in total
| compensation for a single FAANG employee isn't out of the
| ordinary. Great for them, terrible for everyone making normal
| amounts of money -- houses cost $1M+.
| rileyphone wrote:
| I feel like a lot of this is the bottom catching up to the top.
| It seems high net-worths are exploding, driven by a rise in
| public stocks. Real estate is also ballooning. The natural
| minimum wage rising so quickly is the natural finish to an
| inflation whip.
| handrous wrote:
| That's funny, because assets have been inflating just fine, and
| quite quickly, since before the "labor shortage" starting making
| headlines.
| runawaybottle wrote:
| I think all labor blue/white bordering around the middle class
| has another thing coming. Okay, so suddenly we're all too good
| for the blue collar jobs. Fine, go to school or get training and
| come to the white collar industry.
|
| I can say without any allusions that white collar work is
| saturated and competitive, so you are showing up to the wrong
| port.
|
| We will need those blue collar jobs, and if industry starts
| filling it with immigrants while you are off trying to study up
| and failing to get that white collar job, you'll lose out double
| (no income for all those years). All while this is happening, the
| blue collar industry will further depress wages because they have
| even cheaper immigrant labor now - the new standard.
|
| People will resort back to saving whatever money they have, and
| living at home with their parents. The economy will stagnate, and
| inflation won't be a problem because we were overzealous on the
| reality of our economy.
| hkt wrote:
| Actually, keeping interest rates at nearly 0% and printing
| trillions of dollars/pounds/euros over the last 14 years is the
| catalyst for sustained inflation.
| sbierwagen wrote:
| >During his presidency, Trump tightened the enforcement of
| immigration from Mexico for two reasons: protecting American
| jobs, and national security. [...] Without immigrants, industries
| such as agriculture and hospitality fall apart at their seams.
| This is yet another isolationist policy, and it asserts an
| extreme pressure on the supply of workers willing to take
| minimum-wage jobs.
|
| Yes, Trump did that, but he hasn't been President for a while.
|
| https://www.cnn.com/2021/08/12/politics/us-mexico-border-mig...
|
| >(CNN)The Biden administration is facing a "serious challenge" at
| the US southern border, Homeland Security Secretary Alejandro
| Mayorkas said Thursday, saying the US has encountered an
| "unprecedented" number of migrants illegally crossing the border.
|
| >During a news conference in Brownsville, Texas, Mayorkas
| stressed the sharp increase of migrants arriving at the US-Mexico
| border, many of whom are fleeing deteriorating conditions in
| their home countries.
|
| >In July, US Customs and Border Protection apprehended 212,672
| people, up from June and amid some of the hottest summer weeks --
| when arrests usually dip -- and of those, 95,788 individuals were
| expelled. Twenty-seven percent had previously tried to cross the
| border, Mayorkas said, acknowledging that a Trump-era policy that
| allows border authorities to turn migrants away has contributed
| to people trying to cross the border multiple times. July marks
| the highest monthly number of migrants detained at the US-Mexico
| border in two decades.
|
| Adding 116,884 immigrants a month will solve a labor shortage
| pretty fast.
| mchusma wrote:
| Not entirely, as illegal immigrants can be difficult to hire
| for many industries.
| sbierwagen wrote:
| Ah, "agriculture and hospitality", two industries well known
| for their diligence in making sure all their employees have
| green cards.
| theknocker wrote:
| How about employers stop scamming the people they depend on. Has
| anyone ever thought of that? Free market capitalists are now
| bitching that there's a market equilibrium for labor that doesn't
| factor in "fear of abject poverty." Cry me a fucking river.
| arduinomancer wrote:
| > With the rise of AirBnB, however, houses became valued based on
| the income-generating-potential of the house, favoring investors
| while shunning regular homeowners.
|
| Highly doubt AirBnB is a big contributing factor to housing
| prices.
|
| Rentals? Sure.
|
| But considering travel (the use case for AirBnB) has been locked
| down and housing prices continued to soar makes this pretty
| dubious.
|
| And tons of condo buildings don't even allow you to use the unit
| for AirBnB anyway.
| arcanus wrote:
| This article does not address the basic economic premise of the
| substition effect, by which consumers will search for cheaper
| goods of equivalent value.
|
| It would strike me that with massive labor shortages, many
| businesses will look to technology to replace labor. This could
| be via AI, or other automation systems.
|
| Not an economist.
| nitwit005 wrote:
| Many of the things that haven't been automated are unsolved
| challenges. I'm sure restaurants would love it if you could
| fully automate their cleaning, answering the phone, or fixing
| the broken milkshake machine, but we only have partial
| solutions to those sorts of activities.
|
| Which means that if consumers do get pushed to alternatives, it
| might be getting a frozen pizza instead of a restaurant pizza.
| 6gvONxR4sf7o wrote:
| It's not just about things that aren't automated yet. There's
| also the stuff that is automated in some places, but not
| automated everywhere yet. Companies who are dragging their
| feet on modernizing.
| vvarren wrote:
| Hasn't this been the trend for a while now, though? My
| understanding is that self driving trucks are still a decent
| time ahead of us, and logistics seem like the primary
| bottleneck causing a lot of these shortages.
|
| Labor systems will definitely be seeking AI replacements, but
| just because they are needed now doesn't necessarily mean they
| are available now. Although you make a very good point, and I
| think we will certainly see acceleration in this direction.
| hobs wrote:
| You can't have something for nothing, and it turns out you need
| a lot of human to make just a little AI.
| jdavis703 wrote:
| Exactly, we're already seeing this. Lots of restaurants are
| cutting back on front of house staff and replacing them with QR
| codes, cellphones and iPad kiosks.
| miketery wrote:
| QR codes and having a phone for menu is a brutal experience.
|
| Personally I go to a restaurant to have face time with
| people, the phone (or tablet) is a wrench in that, and not
| worth it. I'll pay a premium to not use an electronic
| interface.
|
| Edit: it does make sense for fast food, especially mobile
| ordering (I salute the McDonald's UI/UX(though recent updates
| are making it worse.. typical))
| bingohbangoh wrote:
| This argument never sat well with me.
|
| Businesses buy machines, AI, and other automation systems to
| improve their standing. They do this regardless of the price of
| labor (unless labor gets really cheap but this is broadly not
| true in the US or EU). Investing in such assets give them an
| advantage.
|
| The problem is when everybody does this. Then its no longer an
| advantage but a necessity. There's probably something to be
| said about this also raising the barriers to entry in certain
| fields (e.g. try opening up your steel foundry).
|
| Therefore, businesses will look to technology to augment and/or
| replace labor whenever they can. This is regardless of the
| current labor market (barring extreme circumstances, of
| course).
| hpoe wrote:
| Yes but it is a supply demand. If putting in the automation
| infrastructure is going to cost be $500,000 and $100,000 a
| year to maintain it then as long as I can keep an employee
| for $30,000 a year that probably doesn't scale. Whereas if
| the cost of the employee moves to $50,000 or $60,000 a year
| it becomes more advisable and prudent to do so.
| pdonis wrote:
| _> businesses will look to technology to augment and /or
| replace labor whenever they can_
|
| But a big part of "can" is whether or not the solution using
| technology is cheaper than the solution without it. And a big
| part of that is the cost of human labor. If human labor is
| more costly, it is more likely that a technology solution
| that allow more value to be produced with the same human
| labor will be cost effective. Conversely, if human labor is
| cheap, plenty of technology solutions that would allow more
| value to be produced with that labor simply don't make
| business sense--you'd be spending more for the same output.
|
| So while it's true that businesses are always _looking_ for
| uses for technology, regardless of the current labor market,
| whether or not they actually end up _implementing_ them does
| depend in large measure on the current labor market.
| rcMgD2BwE72F wrote:
| Or labor assisted by machines: if businesses start to
| repatriate factories, one can expect them to take the
| opportunity to automate plants like never before. There would
| be few but highly paid jobs.
|
| There must be a business case for bringing manufacturing jobs
| home, or I've missed something.
| vvarren wrote:
| Well the business case as of late is that the global supply
| chain isn't as resilient as previously believed, with all of
| the disruption seen during covid. Primarily with surgical
| masks and medical equipment at first, but now with nearly
| every good experiencing disruptions of some sort.
| ZoomerCretin wrote:
| McDonald's and low-wage employers in general are not automating
| their entire workforce in the next month. I would wager they
| are not going to automate 10% of service jobs in the next
| twenty years. Why do you think it's just around the corner?
| Barrin92 wrote:
| makes sense but automation is hard, it doesn't fall from the
| sky like manna.
|
| Reality is that automating the easiest jobs is the hardest (old
| Minsky observation) and most essential services you can't
| substitute fall into that category. No robot plumber or roof
| tiler in the near future.
|
| Article is right to point out that the pandemic together with
| the anti-migration stance and isolationism is going to push the
| cost of labour as well as goods.
| [deleted]
| Syonyk wrote:
| > _This could be via AI, or other automation systems._
|
| All of which require chips that even companies like Toyota
| can't get enough of to maintain their production goals. When
| Toyota says, "Yeah, this chip shortage sucks, we're going to be
| 40% lower in monthly production," you know it's not just a few
| people suffering gaming GPU shortages.
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