A Tale of Two Labor Markets
If you do the work of a moving-equipment operator and live in Williston, North Dakota, then life looks pretty good these days.
With just a high school diploma, you’ll earn a decent living: up to $80,000, according to an oil-services executive quoted this week in The Wall Street Journal. You can also do well if you’re among those in construction who didn’t leave the labor force during the real estate crash of recent years.
This sanguine picture stands in contrast, however, to the generally modest gains in income that most Americans are experiencing. “High unemployment throughout the recovery has held down wages across most of the economy,” the Journal reported. “Year-over-year increases in average hourly earnings for all employees have hovered around 2%, before adjusting for inflation.” Even current unemployment figures, 6.7% for February, may be overly rosy, given the number of people who have given up looking for work.
All in all, it’s a big muddle. As entrants moving into the workforce have trouble landing a job at the local coffee shop, an aging employee base in certain industries is opening up new slots that are not so easily filled. Within the Federal Reserve, some officials warn of “considerable labor-market slack,” according to minutes of the central bank’s January meeting obtained by the Journal, while others see “worker shortages in specific regions and occupations” and “emerging labor-cost pressures.”
So what’s going on? If Peter Drucker were to use one word, it might well be “turbulence.”
Part of this reflects the lingering effects of the Great Recession. But another part may well be due to dramatic changes in technology and the increasing automation of all sorts of business processes—a deep shift that may not soon subside.
“We are in the midst of as great a technical transformation as was the first industrial revolution 200 years ago,” Drucker wrote in Managing in Turbulent Times, published in 1993. It’s a transformation that appears to be continuing to unfold.
The aging of baby boomers and the entry into the United States of both skilled and unskilled foreign workers can also feed into what seem like puzzling contradictions. “Population dynamics will stand on their head some of the most cherished beliefs and habits of business,” Drucker wrote. “They will create labor shortages and labor surpluses simultaneously, confounding traditional concepts and measurements of employment and unemployment.”
For that reason, Drucker recommended ceasing to talk of a “labor force” and thinking instead of “labor forces—each with different expectations, different needs and different characteristics.” Such forces were “affected quite differently by economic and social developments,” he added, and it could “only cause trouble to treat them as a homogeneous entity.”
What do you think explains the strange contradictions of the labor market today?