September 22, 2022 at 11:41 a.m.
To solve the inflation crisis, solve the workforce crisis
To solve the inflation crisis, solve the workforce crisis
Our local leaders are correctly calling it a crisis, so has our sheriff, so have many economists and officials, not just here and not just in Wisconsin but across the nation. And, except for the Biden administration and the Evers administration, everybody knows it's a crisis, and one without a foreseeable end to it.
We have written, too, about the causes of the labor shortage, but it's worth just a brief look again. For starters, it pre-dated the pandemic. The pandemic exacerbated it, but a declining number of workers has been coming down the pike for a long time, even if it was partially camouflaged.
Simple demographics are the ground floor upon which the rest of the shortage is built. The massive baby boom generation is retiring by the truckload now, and has been since at least 2010, and younger generations just don't have the numbers to replace them.
Writing in Forbes, Milton Ezrati explained it this way: "The huge baby-boom generation was born between the years 1945 and 1962. Those born at its beginning began retiring as they approached 65 in 2010, and since, an increasing number of boomers has retired, a trend that not only explains the decline in participation but also its beginning right after the 2008-09 recession. As more and more boomers aged, the proportion of the U.S. population of retirement age rose, from 13% in 2010 to 16.5% in 2020. More were dropping out of the workforce than entering it."
But that doesn't explain all of it, or maybe even most of it. There was also prior to the pandemic various social and political factors that drove many of what were already smaller populations of young people out of the workforce. Our increasingly federalized education bureaucracy taught that college was the only acceptable path in life. So larger and larger numbers of young people delayed entry into the workforce so they could become "experts" in something and qualify for a bureaucrat's green card.
Then our federal government told everyone that graduate school was pretty necessary, too, if you really wanted to be an expert - the very pathway to bureaucratic citizenship - and so ever more of our younger generations went there, amassing large student loans and delaying their entry into the workforce even more, all the while devaluing the value of a masters degree.
Along the way, another trend developed: Large corporations, wanting to seem woke and cool but really just seeking free or cheap labor, invented the "intern" pipeline, robbing the economy of ever more seasonal workers.
And when our forever students had finished their internships and accumulated their degrees, most thought the skilled trades and manufacturing were beneath them. Then came the pandemic and what had been the steady drip of a shrinking workforce over time became a flood.
First and foremost, Democratic lockdowns destroyed vast numbers of businesses and jobs, many that never came back. The lockdowns also crippled the child-care industry, obliterating women's child-care jobs on the one hand and forcing other women to stay home to take care of their children when finally they could return to work.
And, of course, after getting used to staying home during the pandemic, even more - as many as 3 million more - older workers just decided to go ahead and retire.
Tons more just quit during the "Great Resignation" because they decided to re-imagine their lives. And how could they afford to do that?
Simply put, they could because of the trillions of dollars the Biden administration up and printed and injected into the economy. As FedEx chairman and founder Fred Smith warned this week, when you just print money and scatter it out of the economic window to the streets below, letting it fall like so much confetti, bad things can happen.
Smith would know. His FedEx trucks and UPS trucks combine to carry about 12 percent of our GDP on any given day. He knows what's coming and going, and he doesn't like what he sees. And this is what he told Fox's Larry Kudlow about flooding money into the economy when there was a labor shortage, pointing out that the federal government has on five separate occasions, from the American Recovery Act to student loan forgiveness, printed and pumped trillions into the economy.
"At the same time, you simply do not have the workers to meet the demand that's been juiced by the printing of this money," he said. "It's exactly like sitting in your car and putting your foot on the accelerator and the brake at the same time."
Pretty soon, something is going to burn out or explode.
All those supply-chain and shipping issues all track back to the labor shortage, Smith said - no truckers to truck, no cargo unloaders to unload ships, no workers to keep the mills and the manufacturers running, no jailers to jail.
And so demand-gone-wild slams into workers-just-gone and, well, Washington we have a problem. On the one end, the lack of workers causes businesses to teeter and many to fail, a starvation of the economy itself, while on the other end the feast of stimulus-driven demand rockets inflation into the stratosphere.
No wonder Fred Smith is worried.
So what is to be done? Well, first, what is not to be done? Most immediately, the Federal Reserve should not do what it intends to do and continue with big interest rate increases. That risks not only a severe recession but, as Elon Musk and Ark Invest CEO Cathie Wood both warned, a problem bigger than inflation: Deflation.
Deflation will solve the not-enough-workers problem, alright, by causing massive layoffs.
Either way, inflation or deflation, the answer is not ever crazier interest rates. It's about not continuing to do the things the administration has done to exacerbate both the labor shortage and inflation, especially the printing of money. Biden should just take a curtsy from his spending mistress and move on.
The second thing not to do is to follow the left's prescriptions for the lack of labor, which is, just open the borders to illegal immigration. That is their most consistent policy prescription. But, while that might be good to channeling some low-wage workers to Koch Industries, it isn't going to solve the depleted ranks of skilled and professional workers in myriad industries across the economy.
But there are some things that can be done, both short-term and long-term. First, boot the Democrats and the Biden administration out of office and stop the spending. That's a better way to cure inflation than higher interest rates, and it will nudge reluctant workers back into the workforce when they exhaust their stimulus reserves.
We need to retool the education system so that education becomes aligned with the economy - it will likely take universal school choice to accomplish this - and so trade schools and occupations will become valued again. We need intellectuals and college-educated professionals, but we also need the literal back-bone of the nation's supply chain and industrial production system, the skilled and trained blue-collar worker. A government school monopoly system dulls the former and dispatches the latter into thin air.
There is also still a huge backlog of immigrant work visa applications.
During the pandemic that backlog prevented some 2 million foreign workers from legally coming here temporarily to work and there is still a sizable backlog in a sluggish system. That needs to be fixed.
And then there are government regulations that actively obstruct many professionals by making it hard through occupational licensing for workers to work.
Connor Boyack of Deseret News calls such licenses "government permission slips," and they are a deterrence to work, not an incentive.
And, to the extent they depress wages, onerous business regulations are another obstacle to a healthy labor force participation rate. Indeed, one of the more overlooked contributors over the years to a declining labor participation rate is the inversely proportional rise of the regulatory state.
More obstacles are the ongoing Covid work restrictions that compel workers to vaccinate or wear masks to work. All of those should be ended immediately.
Lawmakers, too, have a role to play, and some of them have already stepped up to the plate. Last year, state Rep Amy Loudenbeck (R-Clinton) and Northwoods state Sen. Mary Felzkowski (R-Irma) authored a bill to safely expand the times of day that 14- and 15-year-olds could work.
The bill passed the Legislature, but, of course, being a Democrat, Evers vetoed it.
Currently U.S. Sen. Ron Johnson is proposing to incentivize seniors back into the workforce by waiving the payroll tax.
No one of those possibilities will by themselves resolve the labor deficit overnight. Demographics dictate that we are on a long haul when it comes to the workforce shortage. But they could all help, and cumulatively over time make a big difference.
Of course, the biggest thing we can do right now is to stop throwing fuel on the policy fire, and that means defeating the Democrats in November and in 2024.
With the right electoral outcomes, we could replace our labor shortage with a Democratic shortage, and, for a change, that would be a rather nice shortage to have.
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