“America’s labor shortage is approaching epidemic proportions,” reported CNBC, “and it could be employers who end up paying.” Well, yes. That’s how things are supposed to work: Businesses pay more to attract workers in a tighter, more competitive market for labor.
The rhetoric coming out of the employer lobby would leave one to believe that workers are somehow the guilty party in this — they simply won’t accept jobs that pay them less than they’re worth.
The underlying cause of the “labor shortage” is hiding in plain sight. It’s the long-term trend of funneling the gains from labor productivity not to the workforce, but to shareholders. As with any addiction, this process produces short-term euphoria, reflected in share prices, but long-term pathology, reflected in income inequality, poverty and social unrest.
But it’s been going on so long that the addicts, that is, corporate CEOs and their mouthpieces, have forgotten how to respond. The CNBC piece observed, as though this is a new discovery, that “employers are going to have to start doing more to entice workers, likely through pay raises, training and other incentives.” The harvest will be lower corporate earnings, Goldman Sachs has warned.
According to the Wall Street Journal, Goldman’s economists“predict that every percentage-point increase in labor-cost inflation will drag down earnings of companies in the S&P 500 by 0.8%.” That money won’t disappear, of course—it will go into the pockets of workers, and then find its way back into the coffers of corporate America via higher sales.
The narrow attitude that wage growth is bad for business is exemplified by the pummeling that American Airlines suffered from Wall Street a year ago, when it announced healthy wage increases for pilots and flight attendants, even before their union contracts expired. As we reported at the time, the airline's shares lost more than 8% in value over the ensuing two trading sessions, a loss of about $1.9 billion in market value in 48 hours.
"Labor is being paid first again," Kevin Crissey, an airlines analyst for Citigroup, bellyached to clients after the announcement. “Shareholders get leftovers." Hardly: From 2014 through 2016, American had authorized $9 billion in share buybacks to fatten the shareholders’ take. By contrast, the pay raises will cost American $1 billion over three years.
What a shock.
And of course you'll hear the screams for miles: corporate profits will be "down" and shareholders will be the "big losers". We'll have all kinds of gnashing of teeth over American workers making more money being a terrible thing.
Expect Trump to get in on the action, and soon.