I was talking to one agriculture company about whether it would help to get prisoners to collect the harvest, and they said there are a number of problems, including that they might not be very good at it. They might, you know, you need particular set of skills, especially if you're picking soft fruits, for example, and also sometimes the prisoners run away, which is another problem. Hello, and welcome to Stephanomics, the podcast that brings the global economy to you.
I'm Stephanie Flanders, and this week we're investigating why employers on different sides of the Atlantic are considering extreme solutions to their labor shortages. But an economy with millions of jobs they can see can still somehow be one in
which unemployed people struggle to find work. It's all the flip side, the human side of the supply chain snarl ups we come across so often these days, the post COVID economy with demands still gaining pace and inflation and wages heading up, but at least four million fewer people in work today in the US than before the pandemic. Later on, I'll ask Jason Furman, previously President Obama's top economic advisor, to help me solve the riddle of the
missing American worker. I'm also here why agricultural companies in Russia are weighing the pros and cons of using prisoners to bring in the crops. But first we asked US economy reporter Jill Sharp to give us a taste of the US jobs market at ground level. Well, I think that right now everybody is hiring, but they're only hiring for lopaying job. They're hiring for positions as only one day a week, two days a week, and people cannot
make it off of that. That's Precious Briggs, a thirty two year old whose stream of working as a Las Vegas cocktail server came to a sudden halt last April after COVID nineteen shut down America's gambling paradise. After restrictions lifted, she expected her former employer to hire her back, but the call never came. Today, Precious is among over four million Americans who are unemployed were missing from the labor
market compared to pre pandemic levels. Like many others, she's used up her unemployment and pandemic benefits from the government, and she's getting by on rental assistance, Medicaid, and support from her family. She's hopeful that she'll land a full time job as Vegas continues to reopen. I definitely want to be in the casino. I love the people and I love the atmosphere there, So that's definitely something that
I love, and that's that. It was a dream of mine to leave Little Louisiana, my little town, and come here in Tacktail emborsing here. When the pandemic arrived in the US last year, millions of American workers abruptly lost their jobs. Now, as the economy recovers, a puzzle has emerged in the labor market. The country at over ten million job openings at the end of August, according to federal government data, and that number might have increased over
the last two months. The job posting website indeed estimates there may now be as many as eleven million unfilled openings. But while hiring is picked up just recently with over five hundred thousand jobs added in October, millions remain unemployed or have left the labor market since the pandemics started.
Economists and policymakers are all wondering where they've gone. Here's Julia Pollock, chief economist at the online Jobs marketplace zip recruiter, the labor markets, the matching market where you have to choose something and be chosen by it, and where all the jobs are very very differential, the works are very very different and so having you know the same number of job openings and of unemployed or underemployed workers does not imply that there will be a very simple direct match.
For example, while job postings and warehousing and transportation and e commerce related companies have exploded, there's been a decline in brick and mortar retail postings during the pandemic. Workers can't swap out their old job for new one quickly. It takes time for people to build up the networks down the skills that allow them to move from one intitut chunnel. In interviews, out of work Americans described myriad challenges preventing them from seeking or winning full time jobs
like precious. Some say employers are offering fewer hours and lower wages. Others are caring for children or elderly family members, limiting their ability to work. Many are scared of contracting the coronavirus, and some have rethought their careers and opted out of traditional employment. Altogether, they're getting by through patchwork of help, state jobless benefits, federal and local safety net programs,
help from family and friends. A lucky few, like Josh Organ of Omaha, Nebraska, of ditch their workaday lives for riches in cryptocurrency. So it was really hard sitting in my office making a few dollars a day or whatever it was, and then you know, taking a trade on break, on my lunch break and making you know, my whole day's age in five minutes. During the pandemic, the thirty one year old who used to trade crypto on the side,
began to feel increasingly frustrated with his day job. He's trained as a pediatric nurse and was managing a hospital dialysis unit. Last summer, he hired a financial advisor after his wife insisted quit his job and jumped full time into the fast paced world of crypto. I do remember quitting my job and then the next week I made like eighty thou dollars on a trade, like in just in the first week, And I was like, okay, cool, I just made my whole yearly salary at my job
in a week after quitting crypto. And that was right back when the market really started to boom right. Since then, he's made more than seven figures and the family has been able to purchase a vacation home. He loves the flexibility of choosing his own hours and being able to care for his newborn. He also has more time for exercise and meditation, which he says he ignored for the
better part of the last decade. Now I'm like starting to take care of myself a little bit more too, and like trying to be more healthy, um so that way I can obviously live longer, just for my family
and my son. To be sure, many aren't so fortunate, and a survey of job seekers that zip Recruiter did in September, many people said they're relying on friends and family to make ends meet, and more people than ever also want a remote job, but those jobs remain concentrated in specific industries, so that's another source of the mismatch.
Wh people are are holding out for remote work opportunities which have exploded in business and financial services and insurance and tech, but which are non existing in in other industries um like. But now people actually have a realistic prospect possibly finding a remote job. Those people are are waiting out for those jobs in part because the labor
market is tight. People are also more empowered to be picky about respondents in a recent ZIP recruiter survey, so they don't feel the financial pressure to accept the first job offer they receive. And one final reason Americans are staying home their kids. Parents have pointed to the erratic nature of school closings and the high cost of childcare for their reluctance to re enter the workforce. Zack McGrath is a single father of an eleven year old son
with special needs. He used to work in TV and film production before the pandemic and is now looking outside the industry because the hours don't give him the flexibility to look after a son. If classrooms shut down because of COVID cases, the school closing, you know, and even just the random four day quarantines are like the sword of Damocles. And even if I find this ideal situation, you know that it's clearly not out there. That's something
that no employer is gonna want to deal with. You know, just for three days, I can't come in, I can't do anything. It's not gonna happen. So in a minute, I'm going to talk to the former head of President Obama's Council of Economic Advisors, about what's happening to the US labor market and just how this great mismatch between jobs and workers is going to get resolved, if it
gets resolved. But first I want to head over the Atlantic to tell you about another country also looking for workers, Russia. Bloomberg Economy reporter on your Quinn in Moscow is here to explain on your thanks for joining Stephanomics. Russia is facing a similar problem filling jobs across the economy. But I guess in this case it's no mystery where the workers have gone, is it. Yeah, that's right, it's definitely so.
Russia has long had a problem with its aging population because of low birth rates during the turmoil in the nine nineties after the fall of the Soviet Union UM, but now it's got more things that are adding to that. So for a long time the UM it relied on migrant workers coming from poorer countries that were part of the Soviet Union like Uzbekistan, Tajikistan and Kyrgyzstan to fill
the gap that it couldn't fill with domestic workers. But after the pandemic that got a lot more difficult because traveling was more difficult and countries closed borders, and a lot of those people have gone home. So before the pandemic um it was estimated there about four point five million migrant workers in Russia, which makes it one of the top four destinations for migrant workers in the world.
But now we think it's about three million people um and all that has been made worse by high death rates from coronavirus as the government has been reluctant to lockdown the economy and vaccine hesitancy has been a big problem. How was it manifesting itself? This this shortage of labor? Where where do you see that? I know you're often, I'm sure talking to businesses across the economy. Yeah, so
like in some other countries. At first there were big shortages in agriculture, but now that's spreading across the economy. So retail companies are also struggling to get enough people. Another factor is that coreer services are growing really fast, and they would have been staffed a lot by migrant workers in the past, but because those people aren't around anymore than people are shifting to work as carriers and leaving gaps in other parts of the economy. So UM.
For example, X five Group, which is one of Russia's biggest retailers, said that high mortality rates are causing problems for its labor supply. UM and russ Agar, which is one of Russia's biggest agriculture companies, has been increasing wages to try and to try and get enough people and has had to try and automate some more of its
work as it struggled to find enough stuff. And obviously one of the questions, you know, there's the there's been a talk of labor shortages and lots of different countries and UM. One of the question marks is about how much is going to feed into wages and how much that will then feed inflation and make this inflation that we're seeing in a lot of countries not so as not as temporary as as people were hoping. How is that playing out in Russia? Wages go up, is that
pushing up inflation? Yeah? So, like I said, rus I grow say they've raised wages UM up to ten percent. In some sectors wags have been increasing more than that, and that's definitely feeding into inflation and inflation here is UM is a political problem for put into because um, it really hits living standards. And at the moment, uh, it's how high is it now? At the moment, it's at the highest in five years. It's about eight percent, which is a way above the Bank of Russia's target.
And so Bank of Russia has been aggressively hiking rates to try and bring inflation down, but so far it doesn't seem to be having much of an effect. So this isn't just a problem for the economy. It also has the potential to slow down growth in Russia and even undermine Putin's popularity. Yeah, if you can't get so, you've got some you've got inflation and wages going up. But also the central bank kind of slamming on the brakes,
slowing economy exactly. And people remember when there was runaway inflation in the nineties and how that hit living standards. That means that it's much more of the front of people's minds here and consistently and polls people say that rising prices are the biggest problem. So one of the reasons the story had caught my eye was that there was some pretty aggressive tactics that the Russians. Russia being Russia, there's been some pretty extreme solutions to this problem that
they've come up with over the years. And I guess and maybe looking to now. Yeah, so earlier this year, prisoners were brought in to work on railroad upgrades, UM, for for like cold transportation. UM. And that's kind of particularly scary here because it brings back echoes of labor camps and Soviet times where prisoners had to work in
mining or forestry or well reconstruction. So for so far that's on a pretty small scale, but people are consistently talking about how to solve this with getting more prisoners to work. UM. In agriculture, they were looking at getting students to help with the harvest, and last year prisoners also helped with the harvest. And in some regions, UM, the government has also looked at bringing in the army to work on some construction projects. We've gotta worry when
people start bringing the army to do anything. And I can imagine, Yeah, that's sort of shades of some of those sort of false labor camps and everything. Yeah, well all of those as well. I think companies aren't necessarily that keen on these ideas. Like I remember I was talking to one agricultural company about whether it would help to get prisoners to um collect the harvest, and they said there were a number of problems, including that they
might not be very good at it. They might, you know, you need particular set of skills, especially if you're picking soft fruits, for example, and also sometimes prisoners run away, which is another problem. Then I can see that. And what about I mean the immigrants. Obviously it's part of the issue is that they're not coming back from from Central Asia in these places where they had previously come from to work in Russia. Are there any efforts underway
to encourage them back. Yeah, so, um, they're looking at potentially putting on charter trains that would bring migrant workers from Tasha, Kent and Uzbekistan to Russia, which would take several days on the train. And there's also recently an amnesty which meant that migrants who had previously been expelled
for various reasons be allowed back in now. But at the same time, there's a lot of stories and state media about migrant workers and crime, which looks like it's pushing the other way, even if the situation now is pretty extreme. Well on you, as we said that things
are often extreme in Russia. But I appreciate you you telling us about this, uh, this challenge that Russia is facing on your Quinn great, Thanks very much, m H. Now we're going to shift the focus back west to the US and the labor market conundrum we heard about at the start of the program, and I'm delighted to have joining as Jason Furman, Professor of the Practice of Economic Policy at Harvard University and the Kennedy School of
Government and a senior researcher at the Peterson Institute in Washington, but previously chair of President Obama's Council of Economic Advice US. Jason, thank you for joining Stephanomics once again. And the picture we had at the start of the program was an economy, a US economy in which there were job vacancies everywhere, it seemed, but no work for the unemployed. How would you characterize it? It's a labor market like none of
us have ever seen before. Where about you know, six or seven million jobs short of where we should be, but there's still millions and millions of job openings, and so overall the problem looks more like labor supply than the problem we're more used to normally, which is labor demand.
And of course some say this isn't when people talk about job shortages, real worker shortages, that it's really it's not a shortage of of workers, it's a shortage of good jobs that if the wages will hire, people would be doing these jobs. Yeah, I mean, you do have to ask why two years ago people were doing these jobs at a certain wage and now they don't want to do those jobs at the same wage, only want
to do them at a higher wage. The way I teach my introductory economics students, we would describe that as a shift of the supply curve. To get the same amount of labor as before. You can only get there if you're doing it at a higher wage than it
was before. And how do you think that's going to play Is he going to just play out in wages reaching a higher level or are they going to be you know, are there sort of deeper skill mismatches at work where the people who are looking for jobs are just not the same, just not the right people for these many vacancies that are there. Right, So, first of all, large dose of humility, as in order. No one predicted that the labor markets were gonna look nearly this extreme
at this point in time. I certainly didn't, and so I'm not going to tell you I know for sure what it's going to look like. UM a year or two from now. UM, if forced to my best guess, I think there are enough temporary factors that explain where we are now related to COVID, coming out of COVID and in the United States, the policy response to COVID that I think we'll get of the way back to
where we were. Um, it just may take a year or two to get there, But you know, there's a risk to that and a risk that this is a more permanent change. And I guess one of the ways that we get from here to there would be wages going up and then inflation going up, potentially staying up. You know, we had another round of pretty eye popping
US inflation numbers this week. Do you think that is going to play a part that we will see more during enduring inflation driven by wages another place where humility is in order. UM, we haven't seen wage price spirals for a very long time. If there's anything that could bring a wage price spiral back, it is what we've seen with extremely high inflation this past year, and um, you know the way that's affecting workers and labor markets and businesses. So I think that's a distinct upward risk
for inflation at this point in time. I guess we should have a little pause just to sort of reflect on on those latest inflation numbers, just to put them in put it in perspective for us, just what happened one month, let alone what's happened on the twelve month horizon. Yeah, so in October the cp I went up zero point nine percent. A bunch of that was gasoline more expensive, that's something global. But you strip out the vaulatile components, the core cp I was up zero point six um.
And that's a real blow to the transitory stories which had been pointing out the slowing. Of course c p I projecting more slowing, of course c p I. So I think this report, broadly speaking, says, buckle your seat belts. You know, this isn't slowing down dramatically anytime soon. And as you suggest, I mean that's even after taking out
quite a few things. I mean, sometimes when people talk about the core and taking out the volatile things, you know, for some people that's taking out all the things they actually want to buy on a given day. Oh yeah. Oh. Politically, what matters actually is almost the opposite of core. It's what's happening to food prices and gasoline prices. UM. Core is a good construct analytically because it gives you a better prediction of where inflation will be a year from now.
But to understand what people have experienced over the last year, Um, they've experienced prices up six point two percent, and and they hate that. And I know we're going to you're gonna start talking about humility again. But when you have you know, you're sitting in sitting at Harvard at least some of the time, and you know, with your with that more academic kind of long term perspective, I just under what you were thinking now about the legacy of
COVID for the for the labor market. I mean, when a lot of people lose their jobs, and it was a really a lot of unprecedented number of people in a short time last year, we tend to worry about not just the immediate loss of output that they aren't able to produce because they're not in work, but the know how that they've built up in those jobs which might be lost forever might affect their human capital and
the human capital of the country. UM. We had hoped that that would not be such a factor this time, because not least because it was a relatively brief crisis, but also a lot of the most affected sectors were places where there weren't a lot of specific skills to be lost. UM, what do you what do you think one year on about the sort of human capital cost of that enormous spike in unemployment we had last year. I think it's likely meaningful. There's been a lot of
long term unemployment. People really do lose skills, they lose out on the training they were getting on the job, they get dislocated in a certain way. All the evidence we've had from the past is that can have long term impacts on sustainable unemployment rates, on wages, and on productivity in the economy. That's compounded by the fact that we've had low business investment for the last year and a half and some of the steps you'll need to
take to harden against COVID. It's possible that work from home and you know, doing teleconferences rather than flying places will make up for all of that, But I would go with the evidence we have from the past, and the evidence we have from the past says experience here is quite negative. There's a bit of hope. Um, I hope that hope triumphs over experience, but I wouldn't I
wouldn't count on it. But it's interesting. This was something that that I had thought about for some papers that we've put together for for the New Economy Forum that Bloomberg's holding in Singapore next week. At this sense of this idea of whether what the long term impact on productivity and output might be of this crisis, and whether
it might be different from other recessions. As you say, you know, the lesson usually is recessions always cause some permanent damage, especially to human capital, but also the investment
base of the country. But you do have you know, the International Monetary Fund and some other important forecasters now suggesting some kind of COVID dividend for at least some of the advanced economies, including the US that actually whether it's the infrastructure investments by the US administration post COVID, or some of the productivity changes that you talked about working from home, faster digitalization all of US, or maybe
companies using automation more. But all of us using kind of teller teller working and all the things more that all of that was actually going to put the economy, the economy at least in a better place than it than we would have expected pre COVID. Do you does that make any sense to you? Or do you think that there's an we're underestimating some of the negatives that you just mentioned. Yeah, I think that's certainly possible. Um, we could have a COVID dividend coming out of this. Now.
I should point out the I, M F and other forecasters we're expecting for the United States that we'd see that dividend as soon as Q four of one. They had a forecast for g d P post pandemic that was higher than their pre pandemic forecast. Um, that's not I'm going to materialize. So the schedule for this dividend materializing, at least in the United States m keeps getting pushed out.
But I do broadly think that anyone saying that is has a sort of hopeful narrative about the present that we don't really have any evidence or data for this logic, this theory. There's intuition, but there's no hard data, and that that's going to overcome the very very strong data we have about what's happened historically when we've had periods
of prolonged high unemployment and under investment. Clearly there has been great concern that during the pandemic, but potentially also in the legacy of the pandemic, inequalities that we already had are going to have been entrenched and even accelerated intensified in some cases, and you've almost highlighted them in some of the things that you've You've said, you know that the potential for people to lose human capital having lost jobs, just as actually some of the more skilled
and well positioned members of the workforce are actually enjoying more productivity, enjoying working from home, potentially even relocating to bigger houses outside the city and other things. So how do you see that sort of inequality impact of COVID. Yeah, the last two years have been a huge blow to market incomes for households towards the bottom of the economics spectrum, but a hugely progressive response that at least temporarily helped
them much more than it helped anyone else. Um, of course, that response is mostly ending except for money for children, which looks like it will last at least another year. I hope longer than that. Um, you have seen faster wage growth for lower wage workers than higher wage workers.
We saw that before the pandemic, We've seen that during the pandemic, So you know, all in I think it will be roughly neutral for income inequality and has raised wealth inequality because we've seen what's happened to equity markets
and the like. And finally, I think we spoke at the beginning of the year when the history of the Biden administration was a book that had still all empty pages and there was we were thinking about how transformational their President Biden's economic policies might be and considering the economic yeah, the economic impact of this one year and the programs that were unveiled in the first few months of the administration, it's it's been a pretty hard slog
I know, you won't want to knock the people who are doing some of the jobs that you've done in the past, but we know where are where do you think we are now? And how are we doing relative to that kind of transformative hope that some people might have had at the beginning of the year, given the political hand the White House has been dealt. They're running ahead of my expectations for what they'd be able to pass.
They need to get unanimity for one part of their agenda, which is going to be really hard to do, but it looks like they're probably going to do it. And they actually got bipartisan support, especially in the Senate um for another part of their agenda. So they're getting more done than I expected. They're getting, you know, of what the President wanted done, and he wanted quite a lot, and of a lot art is still a decent amount. But no, it's not going to change everything. Um. It's
not going to set climate change. It's not going to make even preschool universal, so um. But it's it's I think it's a good start, um for in terms of medium and long run fiscal fillers. A good note to it. Jason Firman, thank you very much. Thank you. That's it
for this episode of Stephanomics. Next week we'll be in Singapore with special episodes from the Bloomberg New Economy Forum, including, among other highlights, Larry Summers on inflation and the dangers of woke central banking, the future of cities, where the green finance really can save the world, So tune in for all that and follow at economics on Twitter for more news and analysis from Bloomberg Economics, from the New
Economy Forum and around the world. This episode, it was produced by Mangus Hendrickson, and the story from the US was reported by Jill Shah and Katia Dmitrieva. Special thanks also to Anya Quinn and Jason Furman. Mike Sasso is executive producer of Stephanomics and the head of Bloomberg Podcast is Francesco Levi.