Thursday, July 30, 2015

Varying Reasons for Labor Shortages

Nobody wants to return to the recessionary days when large numbers of people were seeking job openings that didn’t exist. But neither is it good when employers cannot find workers to fill job openings—and this is happening in the labor markets for some occupations. The reasons vary.

One example is the market for airline pilots. Republic Airways Holdings, a regional carrier, last year reduced its fleet of 243 aircraft by 27 because of a lack of pilots. It expects to continue such cuts at least through the first half of next year.

Part of the blame for these cuts, according to Republic, belongs to new FAA regulations. One regulation raises the minimum number of hours of flight experience for most commercial passenger pilots. Another adds to the amount of rest time required for pilots, reducing their productivity.

But the Air Line Pilots Association says that the main reason for the shortage is the low pay that regional airlines are offering. In 2014, ALPA reported that for first officers, the starting pay averaged a mere $21,285. The association says that many pilots lost jobs because regional carriers went out of business, and these pilots would be glad to return if the wages were commensurate with their level of professionalism. Foreign carriers are offering much sweeter compensation packages.

A 2014 report (PDF) by the Government Accountability Office cites several additional factors. Reductions in defense spending have diminished the number of retired military pilots available for equivalent civilian jobs. Pilot jobs in general aviation (non-passenger flights) have experienced cutbacks, thus reducing opportunities for new pilots to accrue flight experience. And collegiate pilot-training programs are attracting fewer students in recent years—perhaps because of low pay in the industry. Thus there is concern that the pipeline of future pilots will not be able to provide the workers needed to replace those who retire because of age limits.

A completely different set of dynamics affects the labor market for agricultural workers, where shortages are also expected. Recently, a few states have passed laws making it easier for police to demand proof of immigration status and making it harder for businesses to hire workers who lack documentation. Citizens and immigrants with legal papers have not taken the place of these displaced workers, leaving many farmers without a way of bringing in crops. The American Farm Bureau Federation expected 2012 losses of as much as $9 billion as unpicked crops rotted in the fields.

However, a get-tough policy on undocumented immigrants is not the only factor contributing to the shortage of agricultural workers. In fact, many observers of this job market predict that even reform of the immigration system—which is stalled in Washington—will not solve the problem. Mexico, the source of most of our agricultural workers, is improving its education system and diversifying its economy—including expansion of its own agriculture industry— thus providing more opportunities for its people to find good jobs at home.

Two other occupations facing worker shortages are truck drivers and pizza delivery drivers. Manufacturers are expecting to have trouble finding skilled workers in the near future.

Worker shortages usually cause employers to bid up wages for the limited number of willing and able workers. None of the present shortages seems likely to reach the extreme that leads to dangerous inflation, and a modest amount of wage growth would be welcome in the present economy. Another response is for employers to apply appropriate kinds of automation, such as harvesting machines, and this usually creates good-paying jobs in fields such as engineering, programming, and machine maintenance.

The economy never reaches perfect equilibrium between supply of and demand for workers, and the current worker shortages are much less damaging than the job shortages of the recent recession years.

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