Crazy Idea Dept.: Businesses Having Trouble Hiring Workers Could Pay More

The free market works both ways.

Some conservatives who listen to my radio show on 970 WDAY have a hard time grasping this, but it’s true. The free market can both keep wages low if there is an oversupply of workers, and it can push wages higher if there is an oversupply of jobs.

And here’s the really crazy part: If there is an oversupply of jobs, workers can ask for a higher wage and better benefits because they have leverage in the market.

Another really crazy idea: If businesses that can’t seem to find enough people to fill their open jobs want to hire workers, they could … wait for it … OFFER HIGHER WAGES! They could offer more than the going rate, more than the market average, more than every other similar business in town.

If, for example, dozens of businesses are offering $10-$12 per hour as a starting wage and can’t get people to fill their open positions, perhaps a business could offer $14 or $15 or $16 an hour. If that’s not enough, they could offer more. Whatever their budget would handle. If they are really serious about filling their open jobs, they will offer whatever it takes because that’s what the market demands.

It’s a wacky idea, this supply and demand thing. And right now, this is a workers’ market. There is too much work and not enough labor. So employers are going to have to pony up the dough if they are serious about hiring and retaining workers.

Ain’t capitalism beautiful?

Not to some. This became an issue last Friday, May 19, while I was driving to Minnesota lakes country in the afternoon. My radio was tuned to the “Jay Thomas Show” on 970 WDAY and Jay began a discussion about the tough time local employers are having hiring workers. Jay had received some e-mails from business owners complaining that they couldn’t find enough workers despite offering what they thought were good wages and benefits. Jay’s take was that Fargo-Moorhead doesn’t lack workers, only a willingness to work. His listeners followed with phone calls mostly agreeing with him, throwing in some good “it’s all because of welfare” and “these damn lazy kids these days” spins on the topic.

I couldn’t believe my ears. A conservative host and his conservative listeners were missing the obvious point, one they seem to want to tout at every opportunity: This the free market at work — if businesses can’t find enough workers willing to work for what money they are offering, they have to offer more money.

Simple, right? Every person has their breaking point, where they just won’t be able to say “no” to a certain wage. If $10 an hour isn’t enough, then it’s incumbent upon the business to offer more up until the point somebody says “yes.” If the business decides it can’t afford to pay more than a specific amount, then that is a business decision and the owner has to figure out the next step. In a couple of cases in Fargo, restaurants closed because the owners couldn’t find enough workers.

But to blame workers because they’ve decided they don’t want to work for a certain amount, or they’ve found better jobs for better pay or better working conditions seems a little self-serving. If a company absolutely, positively needs workers, a basic tenet of capitalism says it should be willing to pay market value or above for them.

I received an interesting phone call to my program Monday, May 22, when I brought up the topic. A listener named Cole said it was ludicrous to expect some businesses to pay $15 or $18 an hour because, for example, fast-food workers who expect that aren’t living in “reality.” My response was: The workers deserve whatever they are able to get. If a fast-food restaurant can’t hire people for $11 an hour, it needs to pay more. You can listen to the phone call here:

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By sheer coincidence, the New York Times had a story in Sunday’s editions on this exact topic. It looked at Utah as an example of a state with low unemployment and employers having a devil of a time finding enough workers. The whole story is worth a read, but here are a few paragraphs that feed into my theory of what might break the cycle of thousands of job openings in Fargo-Moorhead:

Companies in Utah, as in the rest of the country, were slow to raise wages in recent years. At first there were plenty of available workers. But by the end of 2015, a report by Utah’s Department of Workforce Services concluded that inadequate wages had become a key reason companies were struggling to find employees.

“It was as if employers hadn’t adjusted their approach to the labor market” as the economy recovered, said Carrie Mayne, the department’s chief economist.

Now there are signs the logjam is breaking. Adam Himoff, the president of Xemplar Skilled Workforce Solutions, a recruiting firm hired by Roofers Supply to find drivers, said he had seen an increase this year in the willingness of clients to raise wages.

Bingo. You want workers, pay them. You want better workers, pay them more. You want better workers who will stay with your company and be valuable assets for years, pay them top dollar.

To use a sports analogy, there are thousands of workers who are free agents right now. They are selling their skills and hours to the highest bidder, just like sports stars. It’s up to local companies to woo them with more money and better benefits than other companies.

Capitalism 101.