The ‘labor shortage’ is good for workers

On Monday, WCCO had run a story titled ‘Target Announces Better Benefits For Full And Part-Time Employees‘.

Minnesota-based Target announced Monday that they’ll be providing better benefits for their full and part-time workers.

A new backup care benefit for when school is suddenly called off gives workers up to 20 days of in-center or in-home childcare. It also covers eldercare.

In addition to medical leave when giving birth to a baby, employees will get up to four weeks of paid family leave when there’s a new child or a worker needs to care for a spouse or parent.

Target is also offering up to 10 thousand dollars to employees who adopt or have a baby through surrogacy.

Have the bosses at Target become altruists all of sudden? Perhaps not. As the Star Tribune reports, ‘Minnesota firms seek recruits earlier, adjust requirements due to tight labor market‘

The labor market “is tighter than it has ever been,” [Mankato-based Bolton & Menk’s talent acquisition specialist Celeste]Voss said.

Like Bolton & Menk, several midsize companies — those with 150 to 499 employees — surveyed by the Star Tribune reported that tight labor markets have been endemic the past few years. In response, they’re all upping their recruiting game.

…

With the tight job market, Redpath [an employee-owned St. Paul-based accounting firm that also has an office in White Bear Lake] just hired its first 100% “mobile” employee — an accountant who works completely at home, in this case North Carolina. Previously, Redpath has allowed some employees to work at home, but only after starting at one of the company’s offices.

The article gives examples from a number of Minnesota businesses, illustrating that “Companies finding tight labor market means they need to up their game to get the people they need”. A ‘tight’ labor market just means that demand for labor is high relative to the supply making labor is a relatively scarce resource. That means that employers wishing to purchase labor have to make more attractive offers. This can take various forms, such as higher wages, better side benefits, or more flexibility, as in the case of Redpath’s accountant.

An imminent ‘labor shortage‘ is often said to be one of the great economic challenges facing Minnesota. Indeed, all else being equal, a lower growth rate of population will lead to a lower growth rate of the workforce and a lower growth rate of total output. But all else does not need to be equal, with increased labor productivity, a worker can produce more output. And it is output per head that matters, not total output.

In the hunt for scarce labor, employers will face greater challenges. But workers will face increased opportunities. We should not be so quick to base state policy on tacking the ‘labor shortage’.

John Phelan is an economist at the Center of the American Experiment.