I gave a brief introduction to WPR’s here and now yesterday, on the “labor shortage” in Wisconsin.Economists wouldn’t use the term “shortage” to describe the situation in Wisconsin after my mandatory comment because private companies didn’t have (and do not have) barriers to raising wages and benefits (see this post). However, supply may be constrained—either because of benefits (e.g., pandemic-related unemployment insurance), savings accumulated from previous pandemic relief programs, increased job disutility, or is the fear of disease. But higher wages and a more flexible work environment can alleviate the high vacancy-to-employment ratio.
First, see how real wages are doing:
figure 1: Average hourly earnings for all workers in 2020 across the private sector (blue) and leisure and hospitality (brown). Recession dates defined by nsa NBER are shaded in gray using Midwest CPI. Sources: BLS Employment Publishing, BLS CPI Publishing, NBER, and author’s calculations.
Clearly, overall real wages (not adjusted for composition) have not increased to induce workers to accept existing jobs. The chart below shows this – it makes sense that job openings have increased as the pandemic has caused some workers to place themselves in new positions.
figure 2: Job vacancy rates, % (black, left scale) and average hourly earnings in 2020 for all workers across the private sector (black, left scale) (turquoise, right log scale). Recession dates defined by nsa NBER are shaded in gray using Midwest CPI. Sources: BLS JOLTS, BLS Employment Publishing, BLS CPI Publishing, NBER, and author’s calculations.
Wisconsin’s job vacancy rate rose from 4.7% in M2 in 2020 to a peak of 7.4% in M7 in 2021 — an increase of 2.7 percentage points. Nationally, 2021M10 growth will increase from 4.4% to 7%. Rates in Wisconsin had fallen to 6.6% as of December. While still high, the ratio using the 2009M06 to 2020M02 trend would be 5.7%.
I suspect that the structure of Wisconsin’s economy – with a larger share tied to manufacturing – may exacerbate the number of job openings during times of high demand for goods. It takes time to sort/move the workforce to where the jobs are.However, competition for workers over time (via Higher wages, benefits, improved working conditions) should reduce the aperture ratio.
