The Resilience of Mixed Breed Economies: Some Perspectives on Government Intervention Stirring the Free Market
In reality, “pure” strands of anything seldom work. Purebred animals suffer from genetic defects and vulnerability to disease. Pure culinary components produce bland and flavorless dishes. Similarly, “pure” economic systems result in undesirable benefits for many or concentrations of power in the hands of a few brokers. In reality, hybrid animals, food combinations, and mixed economic systems provide better results for more people.
The COVID-19 pandemic hit the global economy like bug spray on a hornets’ nest. There was confusion, panic, and, unfortunately, many high-flying careers being knocked to the ground. As we fled to our homes, those among us who could work remotely settled into a new, different, and somewhat relaxed routine. At the same time, our friends in services industries languished. Bars and restaurants shuttered. Fitness clubs closed. Music venues fell silent. After the initial shock of realizing that our “silent spring” was also going to be a “cruel summer,” America steadily drifted into a recovery on top of a recession.
People who were working from home were actually saving money and spending on domestic improvements. Online fitness companies and delivery services found captive audiences. Shipping/logistics firms and supermarkets found themselves struggling to find enough employees to meet demand, resulting in a rise in wages.
At the same time, legislators from both parties worked on economic relief for those hit hard by the pandemic. Stimulus checks, eviction moratoriums, and generous unemployment compensation packages kept most service workers afloat, even while they faced an uncertain future. Following a challenging fall and one of the darkest holiday seasons any of us will ever remember, plus the emergence of vaccines, blood began creeping back to the vessels of the U.S. economy. People began going back out; at the same time, fewer employees were available…creating a labor shortage.
It is tempting to blame the labor shortage simply on individuals receiving unemployment compensation that was higher than the wages they were earning pre-pandemic. I have little doubt that this phenomena has driven part of the shortage; I’ve personally interacted with people who had never experienced the windfall of “free money” before…and they LIKED it. However, there are also other reasons behind this shortage, including:
1. Career changes: People who lost jobs in a particular service industry during COVID moved onto another career field and are simply not available (or chose not) to return to their own position.
Sometimes it takes something catastrophic to stir the power of a mixed system into action. For example, communicable diseases among animals often strike down the purebreds first, with mixed breeds often picking up genetic resilience and immunity as part of a diverse gene pool. Flexible use of ingredients means that during a blight of a particular kind of vegetable, a substitute can readily be identified. When it comes to people, sometimes a pandemic can produce an unintentional collaboration between social oversight and the free market.
The COVID-19 pandemic hit the global economy like bug spray on a hornets’ nest. There was confusion, panic, and, unfortunately, many high-flying careers being knocked to the ground. As we fled to our homes, those among us who could work remotely settled into a new, different, and somewhat relaxed routine. At the same time, our friends in services industries languished. Bars and restaurants shuttered. Fitness clubs closed. Music venues fell silent. After the initial shock of realizing that our “silent spring” was also going to be a “cruel summer,” America steadily drifted into a recovery on top of a recession.
People who were working from home were actually saving money and spending on domestic improvements. Online fitness companies and delivery services found captive audiences. Shipping/logistics firms and supermarkets found themselves struggling to find enough employees to meet demand, resulting in a rise in wages.
At the same time, legislators from both parties worked on economic relief for those hit hard by the pandemic. Stimulus checks, eviction moratoriums, and generous unemployment compensation packages kept most service workers afloat, even while they faced an uncertain future. Following a challenging fall and one of the darkest holiday seasons any of us will ever remember, plus the emergence of vaccines, blood began creeping back to the vessels of the U.S. economy. People began going back out; at the same time, fewer employees were available…creating a labor shortage.
It is tempting to blame the labor shortage simply on individuals receiving unemployment compensation that was higher than the wages they were earning pre-pandemic. I have little doubt that this phenomena has driven part of the shortage; I’ve personally interacted with people who had never experienced the windfall of “free money” before…and they LIKED it. However, there are also other reasons behind this shortage, including:
1. Career changes: People who lost jobs in a particular service industry during COVID moved onto another career field and are simply not available (or chose not) to return to their own position.
2. Child care: A number of people are choosing to remain home with their children because of online learning requirements. Individuals who counted upon the public education system to serve as defacto daycare now must choose between paying for such services (if available) or remaining home. In my region of Pennsylvania, the average cost of childcare is $250 a week and rising…a tough financial impact to bear for those who’ve never had this expense.
3. Personal health: You may have noticed that more elderly people work in the services industry these days. From convenience stores to fast food, many companies are actively recruiting retirees due to their strong work ethic, interpersonal skills, and desire to be a part of the economy. However, these same individuals are at much higher risk for COVID.
4. Family health: More Americans are caring for elderly relatives at home than ever. Combine this factor with the lack of available adult daycare services and the risk of bringing COVID into a home with vulnerable populations and the end result is fewer individuals seeking service work.
While the labor shortage has stymied the speed of our post-COVID recovery, something else has happened: The free market has responded to the wage gap. The so-called “fight for $15” may no longer serve as such a rallying cry to those seeking a higher minimum wage. In this case, supply and demand have begun to address the call for better pay for services workers. In the pre-COVID, sub-4% unemployment rate world, nearly anyone who wanted a job could have one…but wages were not rising quickly. The mindset of many employers was still settled in the post-housing crisis world of the mid 2010’s, where employment mobility was limited by a slow economy and sparse jobs.
In the long run, the biggest (and scariest) variable in this equation will be inflation. How much can companies raise prices to support the increase in labor costs? Who will be the winners and losers? I predict that those with desirable skills and new ideas will, as always, come out on the winning side of such a fight. In 10 years, we will likely look back at the idea of paying a person to scan our groceries in the same way we regard full-service gas stations (well, except in NJ, where it’s illegal to pump your own gas…). That being said, American workers have demonstrated worth through their absence, and for now, most people are reaping the rewards.
Let me be clear: I think it is the individual’s right as a company owner to decide how to run their companies and spend their wealth. That being said, I think there is wisdom in the approaches of corporate leaders such as Warren Buffet, Costco CEO W. Craig Jelinek, and others who choose to share their success with their employees. Well-run companies attract and retain enfranchised employees, who will work hard and innovate for their organizations. Evidence can be found in Glassdoor reviews and customer satisfaction ratings. Well-run companies will attract workers who will go above and beyond to ultimately elevate the organization’s capabilities and offerings.
At the same time, we need sensible regulation to protect employees from the abuses of unchecked power. One need look no further than the early 20th century and the company store systems of Appalachia or the use of child labor in factories. There are times when the government must directly intervene to restore balance and protect the powerless. We cannot forget these lessons and assume that the free market will right its own wrongs when the innocent get caught in the cogs of industry.
For now, however, the free market seems to be doing the right thing by supporting wage growth. Sometimes it takes a breakup to realize how good you had it with your partner. Corporate America and the workforce seem ready to get back together, but some things have had to change to get their relationship back on track. Let the lovin’ begin!
While the labor shortage has stymied the speed of our post-COVID recovery, something else has happened: The free market has responded to the wage gap. The so-called “fight for $15” may no longer serve as such a rallying cry to those seeking a higher minimum wage. In this case, supply and demand have begun to address the call for better pay for services workers. In the pre-COVID, sub-4% unemployment rate world, nearly anyone who wanted a job could have one…but wages were not rising quickly. The mindset of many employers was still settled in the post-housing crisis world of the mid 2010’s, where employment mobility was limited by a slow economy and sparse jobs.
Conversely, the post-pandemic world is seeing $15/hour (and more) as the new voluntary standard for employers. Though it could be argued that government intervention (i.e. generous unemployment pay) moved the goal post for how employers compensate workers, employees also demonstrated their own worth through their absence in the economy. As the old expression goes, you don’t know what you got until it’s gone. Additionally, companies such as Amazon and Walmart have seen their fastest growth and highest market caps because of their vitality to the U.S. economy. So called “ghost kitchens” (delivery-only restaurants) and other curbside-style businesses have turned tragedy into innovation.
In the long run, the biggest (and scariest) variable in this equation will be inflation. How much can companies raise prices to support the increase in labor costs? Who will be the winners and losers? I predict that those with desirable skills and new ideas will, as always, come out on the winning side of such a fight. In 10 years, we will likely look back at the idea of paying a person to scan our groceries in the same way we regard full-service gas stations (well, except in NJ, where it’s illegal to pump your own gas…). That being said, American workers have demonstrated worth through their absence, and for now, most people are reaping the rewards.
Let me be clear: I think it is the individual’s right as a company owner to decide how to run their companies and spend their wealth. That being said, I think there is wisdom in the approaches of corporate leaders such as Warren Buffet, Costco CEO W. Craig Jelinek, and others who choose to share their success with their employees. Well-run companies attract and retain enfranchised employees, who will work hard and innovate for their organizations. Evidence can be found in Glassdoor reviews and customer satisfaction ratings. Well-run companies will attract workers who will go above and beyond to ultimately elevate the organization’s capabilities and offerings.
At the same time, we need sensible regulation to protect employees from the abuses of unchecked power. One need look no further than the early 20th century and the company store systems of Appalachia or the use of child labor in factories. There are times when the government must directly intervene to restore balance and protect the powerless. We cannot forget these lessons and assume that the free market will right its own wrongs when the innocent get caught in the cogs of industry.
For now, however, the free market seems to be doing the right thing by supporting wage growth. Sometimes it takes a breakup to realize how good you had it with your partner. Corporate America and the workforce seem ready to get back together, but some things have had to change to get their relationship back on track. Let the lovin’ begin!
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