Saturday, March 31, 2007

There's a labor shortage?

I know, it's hard to believe when so many people have such a hard time finding a job, it's true. Companies are reporting difficulty finding people.

A global labor crunch, already being felt by some employers, appears to have intensified in recent months. That's in spite of widely publicized layoffs, including Citigroup's (C ) plans to shed as many as 15,000 staffers. In fact, U.S. unemployment remains low--just 4.5% in February--and even companies in countries with higher jobless rates are feeling pinched. "It's not just a U.S. phenomenon," says Jeffrey A. Joerres, CEO of Manpower Inc., the staffing agency. On Mar. 29, Manpower was to release the results of a survey of nearly 37,000 employers in 27 countries. The study found that 41% of them are having trouble hiring the people they need.

What's going on here? With global growth running at a strong 5% a year since 2004, the strategies that companies developed to hold down labor costs--including offshoring work to low-wage countries--are running out of gas far sooner than many expected. The seemingly inexhaustible pools of cheap labor from China, India, and elsewhere are drying up as demand outstrips the supply of people with the needed skills. "Companies were hoping they wouldn't have to worry about human resources at all," says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania's Wharton School. "Now they do."

Corporations are determined to keep labor costs under control, so they're reaching deeper into their bag of tricks. Some are doing more in-house training so they don't have to recruit pricey talent on the open market. Some are lowering their standards for new hires or moving operations to virgin territories other outsourcers haven't discovered, such as the Belarusian capital, Minsk, or smaller cities in Bulgaria and Romania.


Basically, what it means for the US is that Wal-Mart won't be able to keep selling those imports from China at extremely low prices forever. Ironically, outsourcing work to other nations may be a strategy that kills itself as all the businesses manage to do is increase wages world-wide. That's a nice outcome, but I'm still for legislation that would make it impossible for anyone to participate in the American market unless their employees were paid a minimum wage.

Anyway, to get back to the subject at hand. How can there be a shortage if there's a surplus of people? And to be sure, there is a surplus of people, here in the US, in China, India, and most countries worldwide (with a few exceptions like the graying populations of Europe and Japan). Or if we eliminate political borders, there's far more people than there are jobs, so how could there be any shortage anywhere?

But try telling that to employers whose workforce strategies, developed for a period of surplus labor, don't fit the new realities. The challenge is finding people who can do the jobs on offer. Manufacturers in Japan are suffering a lack of skilled workers because of the country's aging population as well as downsizing during the 1990s. "Now they're paying the price for not developing human resources," says Hisashi Yamada, an economist at the Japanese Research Institute in Tokyo.

Cost-conscious employers around the world are fighting to hold the line on labor. In Japan, the core rate of inflation in January was precisely zero, in part because corporations are keeping wage increases to a minimum. Instead, Japanese businesses are going with other gambits, such as hiring temps full-time, increasing mechanization, offshoring work, and rehiring retirees. Toyota Motor Corp. (TM ), for instance, is asking some workers over 60 to delay their retirement for a year or more. In Europe, Swiss staffing company Adecco (ADO ) is teaching Polish carpenters to speak Norwegian so they can fill construction jobs in Oslo.


Eventually of course, all you've done is created skilled laborers who can move on to other jobs and who you'll either have to pay more to keep or let go and suffer a shortage again. This is kind of a lesson in how a free market both is and isn't free. Obviously the big corporations do all they can to hold down wages. Usually they're more successful at that than labor is at pushing wages up. Economists who look at things globally say that labor here is the same as labor there, so all corporations are doing my moving jobs overseas is moving money overseas. The problem is that those people overseas don't have the protections the law affords us here in the states, meaning businesses aren't constrained to the same rules in all places at all times. For the market to operate freely, either there can be no protections anywhere or there must be protections everywhere. I'd prefer that all workers have the same rights as we do here in the US.

1 comment:

Xanthippas said...

Good post. I agree about the legislation, because relying on the free market to boost wages globally just isn't going to cut it. But it's a good sign nonetheless.