Yellen on US labor shortage: Businesses may have to pay more, but it’s ‘good for workers’

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Yellen: ‘It’s good to see wage rise and working conditions improve’

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Treasury Secretary Janet Yellen said Wednesday that US employers, especially those in the service sector, may need to raise wages to cope with a growing labor shortage, but said rising wages are a good thing for American workers. .

“It’s good to see wage increases and working conditions improve for people working in low-wage sectors of the economy,” Yellen said during an interview on MSNBC that aired Wednesday morning. “It’s something we’ve wanted to achieve for a long time.”

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Labor Department figures show a growing gap between job openings and hiring suggests that companies are scrambling to find workers, even though unemployment is still above pre-pandemic levels. In August, there were 10.4 million open jobs in the US, compared to about 7.7 million unemployed workers. i.e. about 1.35 jobs for every unemployed person; For comparison, before the pandemic, there are more job opportunities in every industry than in February 2020.

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Although economists expected the shortfall to end in September – increased unemployment benefits ended, schools reopened and the spread of the highly contagious delta variant began to slow – the labor force actually shrank last month: than before. 5 million fewer people are working. The pandemic began, and 3 million fewer who reported looking for work.

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As businesses struggle to onboard new workers, it’s largely employees who are benefiting from scarce labor: Average hourly earnings jumped 0.6% last month, showing a year-over-year increase of 4.6%. happened. This is the fastest annual pace since the Bureau of Labor Statistics began tracking this figure in March 2007, with the exception of a one-time jump in 2020.

Still, while big-box stores such as Amazon, Walmart and Costco have responded to labor shortages by raising wages, small businesses have said increased labor costs and quality are among the biggest threats to their outlook. . According to the optimism index of the National Federation of Independent Businesses, about 42% of small businesses reported increased compensation — a 48-year record high. An additional 30% of owners said they plan to increase compensation over the next three months.

“They may have to pay more, and that will be part of the adjustment,” Yellen said. “But it is something that is good for workers. Many workers in the service sector have long suffered from low wages and working conditions.”

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Yellen said he expects the economy to return to full employment “by next year” despite a slowdown in recruitment.

“The labor market is very tight in many ways,” Yellen said, calling the pandemic “a very unusual setback.” The unemployment rate fell to 4.8% in September, although it is well above the pre-pandemic low of 3.5%.


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