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Plentiful Jobs, Scarce Workers? Labor Market Tightness during COVID Times | Analytical Corner - YouTube
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Two years of a global pandemic have
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changed the way many people feel about work.
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While there are significant job
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vacancies, there just aren't enough
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workers stepping up to fill them.
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This is particularly true for low-skilled jobs.
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But the question for economists: Are these
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high numbers of unfilled vacancies
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a blessing or a curse?
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From the IMF's Research Department,
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I'm Myrto Oikonomou.
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And I'm Ippei Shibata.
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And we are here to ask:
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What happens when there are plenty
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of jobs but not enough people wanting them?
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One of the puzzles of the pandemic has
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been why workers are scarce despite
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the plentiful job openings, something
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that has been particularly true for low-skilled
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and elderly workers not returning to employment.
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In fact, when it comes to the typical
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advanced economy, almost two-thirds
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of the aggregate employment gap is
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accounted for by low-skilled workers.
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We wanted to investigate this phenomenon -
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labor market tightness - which is
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generally measured as the number of
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unfilled vacancies per unemployed person.
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We first took a look at data from job
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posting website Indeed to give us
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some clues for Australia, Canada,
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the United Kingdom, and the United States.
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Let's start with Canada
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and the period from
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January 2019 to November 2021.
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And let's look at truck driving jobs.
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We can see that pre-pandemic, the number
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of truck driver vacancies ebbed and
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flowed, with a sharp drop in
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March 2020, which coincides
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with the first wave of COVID-19.
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But then an interesting thing happens,
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which is that the number of vacancies
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starts to climb all the way up to
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mid-2021, when there is some leveling off.
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The shape of this line implies
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a sharp and strong recovery of
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the demand for truck drivers.
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If we look at another group,
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construction workers, still in Canada,
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it is a very similar picture.
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Here's the story pre-pandemic,
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and here's what happened after March 2020.
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Although there are some indications that
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the gap is closing now.
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And for warehouse workers,
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there's definitely a pattern here.
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And it's not just these three types of jobs.
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This black line shows
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the mean of all low-skilled jobs with
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a growing number of vacancies.
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So how does Canada compare to other
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advanced economies?
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Well, here's the UK.
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And the United States.
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And Australia.
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As you can see, across these four
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economies, there's a significant shortage
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of workers in low-skilled jobs.
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In fact, the number of vacancies in
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construction in Australia is continuing to grow.
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So what's going on?
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There could be several possible explanations.
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Typically, these jobs - construction work
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or transportation - are not teleworkable.
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Indeed, it's difficult to drive
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a truck or build a wall on Zoom.
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Nor do the jobs offer much in the way
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of flexibility on work schedules -
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something we have seen for other jobs
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in some service sectors.
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And let's not forget that many
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of these jobs involve physical proximity.
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So there could be ongoing
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health concerns about reentering the
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workplace for some of the workers
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in those low-skilled jobs, like warehouse
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workers, for example.
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Whatever the reasons, the effects should
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give policymakers pause for thought.
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On the positive side, if you're a low-skilled
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or low-paid worker and you're employed,
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you'll probably be paid more now than you
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were two years ago, as employers have
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been raising wages to retain and
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attract staff.
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This chart tells that story.
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The blue bars show wage growth prior to
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the pandemic across several advanced economies.
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These are nominal statistics, by the way,
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in other words, not adjusted for inflation.
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Now, if we show the latest nominal
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figures in the United States or Portugal
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or the UK, for example, there's clear growth there.
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If we adjust these figures
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to take into account inflation,
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in a lot of countries,
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those gains start to disappear.
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That points to purchasing power losses
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for workers, and also to a potential risk:
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wage price spirals.
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In other words, a situation where higher
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consumer prices lead workers to demand
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higher wages as compensation,
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which in turn make for higher labor costs
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that are then passed on to consumers
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in the form of higher prices, which
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lead to further wage and price increases.
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How big is this problem in broad
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economic terms?
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So far, unfilled job vacancies
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and wages have risen most for
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low-pay jobs, which represent
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a small share of total labor costs.
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Which means that the resulting pressures
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onto aggregate wage inflation
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have so far been manageable.
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However, if wage growth were to pick
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up further in other parts of the economy,
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and even more importantly, if workers
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sought a pay rise to compensate for past
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price increases, we could see wage
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inflation become a real problem.
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So, how can we ease labor market
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pressures while making sure this economic
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expansion benefits everyone?
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There are some clear options for policymakers.
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Firstly, controlling the pandemic
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remains paramount.
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It will help bring back those who left
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the labor market.
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Well-designed training programs for
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low-skilled workers could also incentivize
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their re-entry to the workforce.
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As well as encouraging flexible working
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practices through changing labor laws
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and regulations to accommodate workers
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changing job preferences.
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So far, these tighter labor markets
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have also been good news.
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But several workers who left during the
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pandemic have yet to return, while
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others have lingering concerns about
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their current jobs and new expectations,
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restricting labor supply and raising
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potential inflation risks.
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The question now is:
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How long will the good news last?
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