02:11 GMT +320 November 2019
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    Why Work Anymore? US Faces Workforce Shortages Amid Dismal Participation Rate

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    US employers are struggling to hire workers, while tens of millions of working-age Americans are abstaining from taking on the traditional job roles, which is partially explained by the higher consumption standards, demographics, and wealth accumulation dynamics of the previous generations.

    Kristian Rouz – Multiple US employers have been recently reporting the lack of workforce available for hire, including both for lower-skilled and higher-skilled positions. Companies have been citing the rise of drug addiction, the deterioration in worker motivation, and low payroll budgets available as main reasons for their inability to find any potential hires at all. Yet, with US labour participation at its 55-year lowest, such a situation seems paradoxical, but Americans seem to be reluctant to work at this point.

    Recently, some US real estate companies have relaxed their hiring rules, allowing convicted criminals to take on certain ‘skilled labour’ jobs, which would allow the builders meet their output goals in the tight market.

    Arizona-based construction company Erickson Cos hired about 30 convicted criminals out of prison within the past 12 months to build new homes as the firm did not want to lose potential profits amidst the high market demand for housing in the local submarket. Typically, it is rather hard for former inmates to find a job, but the lack of skilled and general labour workforce provides vast work opportunities for those willing to utilise their abilities.

    Albeit raiising some security and product quality concerns, the hiring practices of many US employers are becoming increasingly atypical. The tightening immigration control makes it harder to pick from the pool of international workforce, but the main problem is the low labour participation rate.

    According to Goldman Sachs observations, it is the slow US wage growth that prevents younger Americans from actively participating in the labour market. Amidst the elevated personal consumption standards, many skilled and general labour work opportunities are deemed not feasible enough to many millennials, and even the post-Great Recession college graduates are generally refraining from seeking full-time job opportunities.

    “While the unemployment rate and other labor utilization measures signal an economy at full employment, wage growth has been weaker than expected recently… The cohort that came of age during the Great Recession (faces) the pronounced and long-lasting effects of recessions on young workers,” Goldman analysts wrote.

    One of the reasons issue hampering US labour participation is the actual decline in initial pay for the youngest workers. What most entry-level positions are offering is barely above the minimum pay levels across many states, rendering formal education and the related expenses, such as student loans and costs of their servicing, and time investment, almost unnecessary, from the worker compensation perspective.

    Moreover, the minimum wage environment has put significant pressure of America’s decimated working class. Whilst college graduates are facing almost the minimum pay wages when entering the labour market, skilled labour is almost completely unfeasible from the personal finance viewpoint, as across the categories of entry-level white collar, blue collar, and unqualified labour, the level of pay is almost the same.

    Moreover, according to the data from Labor Department and Goldman Sachs Global Investment Research, average weekly earnings of the young workers are currently 95.5 percent of those in year 2006. The measure peaked at 102.5 percent in 2008, ahead of the economic meltdown, and hit the rock bottom in 2013-2014 at 94.5 percent. However, three years ago, a large amount of disincentivised workers was not a big problem due to the still high unemployment.

    Meanwhile, growth prospects for many workers are quite limited in the slow-growing economy, which relies on the services sector, and lacks a solid backing in the form of mass assembly-line manufacturing. Rent pressures, on the other hand, are increasing, along with overall costs of living, despite the average tepid inflation.

    In such a situation, US employers are naturally willing to employ whoever they can find.
    Yet, as Goldman analysts pointed out, in year 1981, after the late 1970s recession, young US workers demonstrated an actual increase in labour participation as new job opportunities started to re-emerge.

    “The 1981 cohort saw a massive surge in employment despite suffering the greatest wage decline of any of the recessionary periods for the past 35 years, and nearly double the experience of the 2008 recession,” Goldman analysts wrote.

    The current US labour market dynamics suggest that there are apparently less and less people willing to take on the traditional job roles. The nascent ‘gig economy’ is partially to blame for it, with driving with Uber being a prominent example. Yet, the wealth accumulation of the past generation and the relaxed work ethic standards have unlocked another option: an increasing amount of young Americans are not forced out of their parents’ home, and thus aren’t facing the acute necessity of making ends meet on a daily basis.


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    labour, employers, drug addiction, unemployment rate, real estate, United States
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