TIPP Insights: Mr. President, support labor and business

By: tippinsights Editorial Board, TIPP Insights

On May 5, Christian Smalls, president of the Amazon Labor Union (ALU), got a rare invitation to visit President Biden and VP Kamala Harris.

There’s nothing unusual about a labor leader meeting a sitting Democratic president. But this event was extraordinary on several fronts. Despite the bombastic-sounding name, Amazon Labor Union is anything but that. The organization represents 8,300 workers at only one Amazon warehouse, JFK8, having won a labor vote to organize by an impressive 11 percentage points. Amazon has 750,000 hourly workers in the United States, so the ALU represents about 1% of its employees.

All the stardom that the media immediately heaped on Mr. Smalls – he even testified at a Senate hearing – failed to convert to additional organizing success. Amazon workers overwhelmingly chose not to form a union at a second Staten Island warehouse just a few miles away from JFK8. Besides, Amazon has filed a complaint with the National Labor Relations Board to overturn the JFK8 election charging that Mr. Smalls and other ALU members illegally intimidated employees during the vote. If the NLRB agrees, ALU will have to organize a new election at the warehouse. So what was President Biden doing shaking hands with and encouraging a fledgling union leader?

When workers at four Kellogg plants went on strike in October, the company announced plans to replace them permanently after repeated talks failed. The leader of the free world decided to interject. “I am deeply troubled by reports of Kellogg’s plans to permanently replace striking workers,” President Biden said. “Permanently replacing striking workers is an existential attack on the union and its members’ jobs and livelihoods.”

There was just one problem with Biden’s inflamed rhetoric. Kellogg’s workers already earn on average $35/hour, generous benefits, and confirmed cost of living increases. Many people nationwide would be glad to swap their jobs with such well-paid workers.

In President Biden’s mind, employers are always evil, and employees are good. He has consistently demonized America’s business and industry since assuming office. As the Wall Street Journal correctly said, the White House has blamed employers (oil companies in November, meatpackers in December, and this week, the railroads) for America’s record-breaking 8.5% year-over-year inflation in consumer prices. This was after he dishonestly blamed Vladimir Putin for increasing oil prices, never acknowledging that gasoline prices had increased 48.4% under his watch before Russia invaded Ukraine.

More than at any time in history, American workers are sitting pretty because of emergency measures enacted during the pandemic. First, the government sent bucket loads of free cash to workers. Second, companies embraced liberal work-from-home policies that further added money to employees as families saved on childcare, transportation, parking, and eating-out costs. Third, unemployment benefits were significantly increased to levels so high that employees refused to return to work even after getting vaccinated in areas where Covid-19 had subsided.

The balance of power has moved so dramatically from employers to workers that economists coined a new term: “The Great Resignation.” Last year, 47.8 million workers quit their jobs, an average of nearly 4 million each month, meaning 2021 holds the highest average on record, topping the 2019 average of 3.5 million. The term represents the confidence that the modern worker has. If every aspect of a job is not appealing, the worker would rather stay home and wait for an opportunity that exceeds their expectations.

TIPP defines a household as job sensitive if at least one family member is seeking full-time employment (job seekers) or if the family has concerns that a member may lose their job within the next year (concerned).

As the chart below shows, 14% of U.S. households were job seekers before the pandemic in March 2020. Last month, 41% of households were job seekers.

It is a misnomer when the media chorus likes to call it a “Great Resignation.” The more apt description is “Great Vacation,” because workers are in reality seeking a full-time job, but one that exactly meets their needs. Compromise has become an alien word to the modern American job-seeker.

So, how has the Great Resignation, while helping the employee, hurt the economy? Friday’s jobs report provided the starkest clues that America is headed down the wrong path from which economic recovery will be hard.

Economists define the labor force participation rate as the share of adults who either have a job or are actively looking for one. In April, the labor force shrank at a time when American employers, desperate for workers, continued to offer signing bonuses and wage increases unlike any in recent memory. Forbes reported in March that United Airlines is offering ramp workers a $10,000 signing bonus. Last September, the Ladders said that a South Dakota hospital offered nurses who signed long-term contracts a whopping $40,000 bonus.

The latest report shows that there are now nearly two jobs for every unemployed worker. Importing labor in a politically charged environment is not practical, and Congress will never pass a temporary worker visa bill in an election year. So, how will the United States plug this gap? How will the American economy produce sufficient goods and services without adequate workers? Who will bear the pain as companies increase prices to balance limited supply with exploding demand?

This week, Fed Chairman Jerome Powell acknowledged the dire situation when he said: “You can see that the labor market is out of balance: You can see that there is a labor shortage. Everyone loves to see wages go up, and it’s a great thing, but you want them to go up at a sustainable level. We’ve got to get back to price stability so that we can have a labor market where people’s wages aren’t being eaten up by inflation and where we can have a long expansion, too.”

President Biden should act as the leader for everyone in America, not just the labor constituencies that put him into office. He should obviously celebrate the enviable position in which labor finds itself after decades of struggle – but simultaneously use his substantial political clout with the labor movement to encourage unions to not hold out for even more. The President should lobby unions to address the economy’s workforce supply-demand issue and educate them about inaction as a national security priority.

This unifying approach is not only morally right but it also makes practical sense – there can be no vibrant America without companies and workers. Disproportionate wage increases tend to exacerbate an already frightful inflationary situation. Thursday’s 1,000-point market drop, combined with expectations that the Fed will have to resort to more interest rate hikes, promises to roll back whatever victories the labor movement has gained.

And if that happens, all of President Biden’s chest-beating rhetoric for labor will have been for nothing.

READ MORE FROM TIPP INSIGHTS

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