Links to Consider, 5/26

Labor shortage (?); Nicholas Eberstadt on wealth gains; the Zvi on labor economics; Brink Lindsey on flourishing;

For Business Insider, Aki Ito writes,

baby boomers are retiring in droves, and companies are suddenly finding themselves without an endless reserve of available bodies. "The labor shortage we're dealing with today is likely to remain this way — and perhaps get even worse," says Jay Denton, the chief analytics officer at LaborIQ, which provides salary analysis to employers. "It's going to continue to be really hard to attract people and get them into new jobs." We're entering what is shaping up to be the Forever Labor Shortage.

Pointer from Moses Sternstein.

In contrast, I wrote There is no labor shortage

most economists would share my confidence that the market can take care of a labor shortage. . . We do not know how far away the current wage rate is from the one that is consistent with no excess demand for labor. We do not know if the process of wage adjustment will be inflationary (nominal wages rising) or deflationary (prices falling relative to wages). We do not know how long the process may take.

Noneconomists, who forecast a chronic labor shortage as if there were no equilibrium wage rate, know even less than economists do.

That was in 1997. Since then, we have had three episodes in which labor demand weakened. It happens to be strong again now. I remain confident that we will not have a forever labor shortage.

Nicholas Eberstadt writes,

For almost two decades—from 1989 to 2007—mean net worth for this bottom half of households was basically flat (a little over $30,000 in 4Q2022 dollars). And in 2019, on the eve of the COVID-19 pandemic, real mean net worth for these same households was just 4 percent higher than it had been in late 1989, three decades earlier. The implied doubling time for net worth, given those endpoints, would have been a little over 500 years.

Since 2019 net worth for America’s bottom half has surged. In 2022 it averaged nearly $63,000—close to twice as much as in 2019. If the 1989/2022 tempo of growth could be maintained, net worth for the bottom half of US households would be doubling every 36 years. But most of this sudden leap appears to have been due to special emergency transfers of borrowed public funds during the coronavirus pandemic. That was a one-off, with no obvious prospect for repeat performances.

And how long before it reverses? Sending people checks when they’re locked down and not producing or buying can add to paper wealth. But some of it gets inflated away, and the rest of it probably gets spent pretty quickly.

Zvi Mowshowitz writes,

If you can check off a standard set of boxes that make you capable of ‘normal work’ and you are willing to accept what the market has on offer, you will be highly employable. When you lose one job, you will be able to find another. It would take quite a lot of AI automation or economic decline to change this.

Whereas if you can’t check enough of the boxes, and you have some incompatibility with the jobs on offer and can’t find a niche that fixes this that you will accept, you will struggle. And it makes sense that there’s mostly a sharp line between these two groups, with a third group that doesn’t always want to work and is mostly in category two when they try.

Note that a large majority of workers can check off the necessary boxes. This rules out anything too onerous, or the possession of an especially valuable skill, as a barrier to joining the first group.

The paper that he cites says that “observable demographic characteristics only explain a small part of the cross-individual variation in segment membership.” Of course, “observable demographic characteristics” probably does not include conscientiousness, propensity for substance abuse, etc.

Brink Lindsey writes,

Nowadays, in our postindustrial service economy, the business of society is increasingly disconnected from physical problem-solving; instead, our preoccupations are ourselves and other people. I believe that this progress has had a profound and unfortunate side-effect: our mental lives are no longer disciplined by regularly bumping up against the hard, nonnegotiable demands of physical reality. Instead, our main reality is the murky, dreamy world of our and others’ thoughts and feelings, where everything is negotiable and what is popular or self-serving regularly trumps what is true. Losing our anchor in the physical world, I fear, has allowed us to drift off into all manner of morbid delusions and pointless status contests. . .I worry about the sustainability of a social order in which the vast majority of people have no understanding of how any of that foundation works and indeed lack the mental skills and habits that make such understanding possible.

I recall during the pandemic when friends were complaining that there were still people who would not lock down. I had to remind them that their ability to eat relied on people who stayed engaged in the production and distribution of food.

Lindsey’s solution:

my vision for social progress includes a significant expansion of home- and community-based production for internal use. With appropriate investments, we can help people achieve a measure of economic independence by providing for some of their own basic needs — including food, shelter, energy, childcare, schooling, and elder care. This project can be pursued at various levels of ambition, from helping families trim their grocery and electricity bills, to promoting the creation of teaching and care-giving co-ops, to developing new exurban communities designed for a more self-sufficient lifestyle, to establishing pioneer outposts dedicated to settling remote areas and exploring new ways of living.

He wants

pioneer communities are all committed to a high degree of self-reliance, and residents are proud of the fact that they take care of their own needs: they grow much of their own food, generate their own electricity, mind and school their own kids, and take care of their aging parents. More and more of them build their own housing as well.

I have no problem doing away with government schools. As for the rest of it, I’ll pass.

If my grandchildren spend time at a summer camp getting in touch with the physical world and experiencing some communal self-sufficiency, great. But for adults, I am not in favor of substituting local production for specialization and trade. The kibbutz experiment has been tried. It was not a panacea.

Substacks referenced above:

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Rebalancing Capitalism

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Papers, Please #1: Various Papers on Employment, Wages and Productivity

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Bye bye biotech, hello loneliness