Given the continuing dangers of getting infected with the Coronavirus at work, and added home care responsibilities, working from home may be the best of not good choices. But it decreases social interaction with fellow workers and makes it harder to informally plan on the job for collective action.
The Great Resignation
Quitting jobs are at all time high since data was first collected in 2000, reaching 4.5 million in November 2021. Much of this is workers taking early retirement; 2/3 of those leaving the labor force are 55 and over. They are leaving the work force for fear of infection or dissatisfaction with their job and deciding to live off their pension and savings, 10 million plus jobs are currently not filled, greater than or equal to the number of unemployed, even if we use a more accurate and real definition of unemployment.
Many of those quitting are moving between jobs, so they will be working for another employer. Many are sick with Covid.
The majority of those leaving their jobs are women as are the majority of the 3.6 million workers who have not returned to work. A major reason is having to do unpaid care labor– to take care of their kids, whose schools may be closed, or their elderly parents. There is a lack of daycare and of daycare workers–who are quitting in large numbers.
The greater number of job openings than people looking for work–gives workers more bargaining power–as people are quitting current jobs for better pay, safer jobs, for job training to change professions, to open small businesses, especially e-commerce. The numbers of small businesses have grown substantially in this COVID period.
Savings and checking account balances proportionately have grown most rapidly among the poorest 25% of population. So, it is easier to quit with some savings and not take the first job available. This increases one’s bargaining power and ability to hold out for higher wages.
Wages are increasing in jobs where there are many openings, e.g., restaurant, health care workers. “The Great Resignation” is a form of resistance and causing higher wages for some workers but thus far is more individual than collective struggle.
Inflation and the Real Wage
By inflation, we mean a general increase in prices. Prices rose 7% on the average in the U.S. in 2021, the highest since 1982. Gasoline prices rose 58%, meat 13%, food, overall, 6.5%; utilities and used cars by a third; housing prices are rising rapidly; and rent, other goods and services less rapidly but rising.
One way of thinking about the impact of inflation is analyzing it in relation to wages. The change in one’s real wage is the % change in wages – the % change in prices, so if wages rose by 4% and prices rose by 7%, the real wages declined by 4-7% = -3%. This decrease in the average wage of 3% is what happened in 2021. However, for lower income workers, wages have been growing more rapidly than the inflation rate so their real wage has been growing although incomes continue to be the most unequal in the U.S. of countries in the Global North. Firms are forced to raise wages when there is a large shortage of workers. The growth of savings from the stimulus package and extended unemployment benefits and child benefits has meant the ability of workers to refuse jobs unless wages increase. These government benefit programs have largely come to an end meaning that savings and the connected bargaining power of workers are likely to decline. Although wages grew more rapidly for lower rather than higher income workers which has not usually been the case in the U.S. for 40 years, income and wealth inequality still grew as the stock market rose by over 20% in 2021.
Why the growth in inflation, from an average of about 2% a year over the last 20 years to 7% in 2021? This is important in order to understand remedies.
Let us consider what has happened to the supply and demand of goods and services!
On the demand side, there has been a shift towards purchases of goods, e.g., purchase of durable goods, goods lasting more than 3 years, are up over 20% in 2021 while services are at prepandemic levels. Given that firms are profit maximizing, this increase in demand gives them the ability to sell more goods and still raise their prices. The various stimulus packages and other income support mean individuals and families, even with reduced employment can maintain or even increase their demand for goods and this is where inflation has been concentrated.
Supply for many goods has also been restricted contributing to inflationary pressures. Many of these goods, whose demand have risen, are imported and we are living in neoliberal global capitalism, which means just in time production, little inventory, and global supply chains. So, a lack of parts like computer chips cause shortages and rising prices for cars and other goods that use them as inputs. Our ports cannot accommodate this increase in supply of imports nor are their sufficient truckers to move all the goods when they are unloaded. The cost of shipping has risen substantially which contributes to higher prices. Unlike other recent inflationary periods in the U.S., the current period is to a major extent caused by supply chain interruptions and shortages.
This increase in demand for goods and higher costs and bottlenecks have caused prices to rise, especially in a world where firms have the power to raise prices and profits.
Much of the mainstream media and the Federal Reserve Bank are calling for austerity, higher interest rates, no child credits, i.e., decreasing aggregate demand in order to reduce prices. Often unstated, this will cause higher unemployment and lower wages. It is the wrong solution although likely to be policy. It is wrong to say higher wages are main cause of the recent growth in prices as overall wages are growing less than prices. Corporations are marking up prices more than wages are increasing so they are using their monopoly power to raise prices in a period of short supply. Reducing monopoly power by applying anti-trust laws would reduce inflation.
Inflation isn’t all negative. It does harm those on fixed income although this can be mitigated when payments are adjusted upwards each year at the inflation rate, e.g., social security benefits. For those who are debtors, the majority, with student loan debt, those with large credit card debt, auto loan debt and mortgages, inflation reduces the real burden of their debt. For example, if one owes $1000 and prices double, let us say over a ten-year period, $1000 after ten years is equivalent to what $500 was, 10 years ago. So, the burden of your debt is reduced by one half. Simultaneously, creditors–financial institutions, wealthy corporations like Apple, Amazon have a huge amount of cash reserves and their real value falls with inflation. They are creditors. So, inflation has a distributional effect that benefits debtors and harms creditors. Which side are you on? Part of the anti-inflation bias historically of the Federal Reserve Bank and the mass media have been their identification with and connection to financial capital.
So, what is the solution in the short run? Price control of goods whose prices are rising rapidly should be imposed by the Federal Government. They can be ended when supply chain disruptions end. I would also add, rent control to stop the rise of rents. Price control is preferable to increasing unemployment which Jerome Powell, the head of the Federal Reserve Bank, in testimony to Congress on January 11, 2022, indirectly confirmed will be Federal Reserve Bank policy, when he testified that raising interest rates and reducing credit is likely in in the coming months.