Dear Employers: Stop Acting So Entitled and Raise Your Wages

It's not American workers who are acting entitled during this labor "shortage"

Have you heard? You must have seen the headlines and read the comments sections. If not, here’s the gist.

• NOBODY WANTS TO WORK ANYMORE.

• UNEMPLOYMENT BENEFITS ARE TOO HIGH.

• OUR FELLOW AMERICANS ARE LAZY AND ENTITLED.

• ALL OF THIS IS CAUSING A LABOR SHORTAGE.

Don’t buy it.

These are the histrionics of cheapskate employers who desperately want to hide the truth.

The truth is that it’s not labor that’s in shortage – it’s wages.

And it’s not the workers who are acting entitled – it’s the employers.

In economics, supply “shortages” only exist relative to the price that demand is willing to pay for the supply of a good.

Labor supply is like any other supply of goods. I’ll use lumber here because it’s relatively straight forward and it kind of sounds like “labor”.

If we say “lumber supply in the US is in a shortage”, what we are really saying is “the demand for lumber is outstripping the supply of lumber,” and what follows is “so the price of lumber is going up.”

In other words, the lumber shortage only exists relative to the price that buyers are willing to pay.

When there is a 'shortage', then price goes up, and generally, demand decreases because fewer buyers are able to afford the new higher price equilibrium.

Another thing that may happen is that some buyers will want the same amount of lumber at the same price they paid before, and so they must *lower* their standards to meet the price equilibrium that they can afford.

There’s three things that a buyer can do in response to a shortage.

1. A buyer can get the same quantity of lower quality lumber for the same price;

2. A buyer can get less quantity of the same quality lumber for the same price.

3. A buyer can pay a higher price to get the same quality and same quantity of lumber.

The point being that demand must adjust according to price increases, not supply. In the case of labor, the demand side is employers, and the price is wages, and the supply is the pool of unemployed persons. Just like lumber, employees come in varying quality and quantity.

When there’s a lumber shortage, no one stands around and calls the mill owners “lazy” or “entitled” for raising prices. That would be ridiculous, and it would be the lumber buyers who would be called entitled for demanding that the mills keep the price of lumber the same as before the shortage.

Labor is just like any other good, and the purchasers of labor are acting entitled by declaring that “there’s a shortage” and then refusing to raise wages in response to the “shortage”.

Just like the lumber mills, it’s not the labor supply side that is lazy or entitled right now.

The group that’s acting lazy and entitled are the employers who are refusing to meet the new, higher price equilibrium. Employers are saying that there’s a shortage and then demanding to get the same quality and quantity of employees for the same price.

It’s peak entitlement for employers to demand that the costs of the shortage be born out by the supply side rather than the demand side.

If one homebuilder can’t afford lumber at the new higher prices, then they can’t provide their services and they lose to their competition.  

And it’s the same thing with employers. If a business depends on employees but can’t afford to hire them in the face of a “shortage,” then that business has failed. Guess what? Its no one’s responsibility to lower the price of labor just so that business can continue to exist.

No one is entitled to own a business. No one is entitled to have employees. And no one is entitled to have employees who are forced to accept low wages, just so someone else can own a business.

The cold hard truth is that if employers can’t afford to meet the meager new price equilibrium of at least $14,400/year ($300/week x 4 weeks/month x 12 months/year)¹ that folks are receiving in unemployment benefits, then those employers can’t afford to have employees.

And it’s not the government’s job to let our citizens starve just so employers can underpay people to work for them.

If employers can’t afford to have their business without an employee who can accept below poverty wages, then the employers can’t afford to have a business.

It’s not the workers who are entitled for rejecting jobs that don’t pay the bills – it’s the employers who are entitled for thinking they deserve to own a business and that they deserve to keep their business running solely by keeping wages low.

They are entitled for believing that they deserve a profitable business, even if profits depend on starvation wages.

The stern lesson from this “shortage” is not for employees who are demanding living wages to learn.

The lesson to learn here is for the employers, and it’s simple.

If you want any employees, offer higher wages.

Otherwise, you can’t actually afford to run your business. In that case, it might be time for you to accept one of the many job openings that we keep hearing so much about.

If you don’t want to accept those wages, then you see exactly why no one wanted to work for you either.

1. As a commenter pointed out, my original math was way off. I originally quickly came up with $24,000 in unemployment benefits, which is way off. The real figure is closer to $15,000 Woops. The case still stands, as the commenter pointed out:

‘$300 x 4 x 12 is $14,400, not $24,000. I'm also not sure why you didn't just go $300 x 52 ($15,600). Obviously, either way, it is significantly less than what you posted, so that would seem to help your point.”