Yesterday, we looked at the record-breaking (Job Openings and Labor Turnover Survey) JOLTS data, which provided good news for American workers. But having more job openings than people looking for work has a downside, too.
Unless something is done, the lack of workers could stunt economic growth, which has been improving, and it could spur higher inflation, as employers need to pay more to attract qualified workers.
Add on the inflationary pressures from trade tariffs, as well as efforts by the Federal Reserve Board to boost inflation, rising oil and healthcare costs, and other inflationary pressures from a strong economy. In the very near future, the Fed may be boosting interest rates at a faster pace to control inflation, which would likely have a negative impact on the stock market.
Conversely, employers are likely to seek ways to boost productivity, which has been in a rut for decades.
Adding More Job Seekers
What else can be done to add to address the demand for job seekers?
Workfare. Remarkably, even with Clinton-era changes to America’s welfare system, many Americans who receive government assistance have a disincentive to work. Making it more beneficial for all working-age Americans to find jobs would help address two major problems:
- The shortage of potential workers, which is likely to grow worse in coming years, as the population continues to age and baby boomers continue to retire
- The growing federal debt, which has cleared $21 trillion and continues to grow at an unsustainable rate.
U.S. Congressman Kevin Brady, chair of the House Ways and Means Committee, has moved legislation that would update the Temporary Assistance for Needy Families (TANF) program.
“The current system requires states to engage 50% of families in work activities,” The Wall Street Journal reported. “But that means states can write off some of the tougher cases. And gimmicks like a ‘caseload reduction credit’ allow states to buy down the 50% rate to a much lower benchmark or even 0% of families. Mr. Brady’s bill would require that 100% of recipients engage in work or training as a precondition of receiving benefits.”
The bill would not cut funding, but, long-term, fewer people on welfare will mean lower costs. And, as more Americans join the workforce, more people will share the burden of paying federal income taxes.
“Paying people to make it easy not to work—and thus languish for a lifetime in poverty—is not compassionate,” The Journal says. “It’s destructive of human dignity and leads to more inequality.”
Immigration policy. Immigration has received more talk than action for many years and the Trump administration has been openly opposed to many immigration programs, not only for security reasons, but because of President Trump’s strong belief in putting Americans first.
Employers could potentially benefit, though, from an expansion of the H-1B visa program, which allows foreign professionals to work in the United States for a limited time. The number of H-1B visas is capped and recipients are chosen by lottery. As a result, many of the best and brightest foreign students who obtain advanced degrees and develop skills that are in demand are forced to leave the country.
While it would be logical to enable foreign workers with in-demand skills, as well as would-be entrepreneurs, to live and work in the United States, the H-1B program has also been subject to fraud and other abuse.
The Trump Administration is tightening the rules for H-1B visas as they apply to staffing agencies, which often obtain H-1B visas and hire groups of foreign workers for placement in U.S. companies.
Expanding the program, while addressing its shortcomings, could help address the shortage of qualified workers.
Social Security changes. The Social Security Act of 1935 set the minimum age for receiving full retirement benefits at 65, but at the time few Americans lived that long. The average American life expectancy was just 61.7 years.
Today, Social Security benefits can begin at age 62; eligibility for full benefits begins at age 66 for people born in 1954 and gradually rises to 67 for those born in 1960 or later. The average American life expectancy, though, is 78.7 years.
So the age of eligibility for full benefits has increased by a year, but life expectancy has increased by 17 years. That helps explain why the system is going broke.
Raising the age significantly would not only help keep the Social Security system from becoming insolvent, it would also encourage people to work longer.
Recession. The imbalance between the supply and demand for potential employees is likely temporary. We are currently in the second longest economic expansion ever and are overdue for a recession. When the expansion ends, so will the high demand for workers.