If you’ve ventured outside in the last few years, among other changes, you’ve likely noticed there’s a shortage of staff. Help wanted signs are outside of service businesses. Major hotel chains have stopped providing daily room service. Starbucks have shut down for days at a time and my very expensive gym has reduces its hours. Modern day anarchy. Let’s see what’s going on and if there’s anything we can do about it.
Here’s a qualitative summary of what we are experiencing: we cannot get the same services at the same quality and price today compared to before the pandemic. Moreover the narrative of unavailable services is accompanied by workers decrying working conditions, low pay, and inflexible hours, among other things. My favorite manifestation of the plight workers is the subreddit r/antiwork.
The membership for the subreddit r/antiwork has hockey-sticked in past year. While this subreddit recently suffered from a Moderator’s unfortunate interview with FoxNews (I’m not linking because Mods aren’t paid, they’re not supposed to be prepared for 15 minutes of fame, and they don’t represent a ‘movement’), the subreddit exposes predatory treatment of regular workers and the fact a lot of jobs don’t provide for any kind of human decency-type of features (not calling them benefits because in some countries they are rights) like sick leave, bereavement leave, safe working conditions, consistent working hours, and provide a sane way to spend 8+ hours per day. Here’s the subscriber growth:
This looks a lot like r/wallstreetbets during the $MEME stock craze of 2020 and 2021. $MEME stocks finally died; see my post that aptly preceded its inevitable decline (also see my note (1) about selling at the end of this post).
The growth of r/antiwork highlights the growing awareness in the US that some employers take advantage of their employees. Reading through the posts, as expected, most of the complaints arise from entry level, lower paid jobs created by small businesses. It makes sense that if small businesses are strained by a global pandemic they try and pass on as much of the strain to their employees, even if it doesn’t sound like the most humane response. In contrast, most tech companies sent their employees home in March 2020 and gave them a one-time payment to set up a home office and tacked on additional vacation days as the pandemic challenged mental health. As mentioned in my post about the shape of recovery, some industries have grown stronger while others such as travel, entertainment, hospitality, and food services are still struggling.
As we enter a new normal, we would expect to see a recovery in industries most affected by the lockdown. Consumer spending came roaring back, American savings accounts are the highest they have ever been, and a lot of states are acting like Covid is no longer a threat.
Overall employment is on track to fully rebound. Employment in the US will recover to pre-pandemic levels in 2022.
Find more statistics at Statista
The US population only grew .1% last year, thanks to Covid and Millennials preferring craft beer over babies, and we all got 1 year older. So why are we noticing a significant difference in the quality, quantity, and cost of literally any service?
The US labor force participation rate is not back to pre-pandemic levels. I think we’ve all seen the headlines that unemployment rate is 3.9%, which is historically low and some would argue below the natural churn rate. So, that’s why labor-force participation rate is such an important statistic to focus on. Couple a decreasing participation rate with an aging population and 0.1% population growth rate, we can clearly see there are fewer of the folks available to work pre-pandemic than current-pandemic state.
I’m going to make a few controversial points here. I’m open to criticism and changing my mind. Just don’t #cancel Adam Sutler. A lot of service jobs pay minimum wage or just above. Prior to the pandemic on-demand delivery and ride-share drivers accepted wages near minimum wage. Hospitality, food service, retail, construction, transportation, you-name-it workers accepted low wages. A lot of the lower wage workers are foreign-born. A lot of these services required people to show up in person to receive these services. Service workers in the US who were forced out of jobs that required in-person human interaction started different careers. Here are some trends around the change in population of foreign-born population in the US.
The US relies 10% more on foreign born labor than any other major economy, yet our foreign born population dipped sharply at the beginning of the recession triggered by the Great Trump Border Surge in March 2019. Yes, the US let in fewer immigrants, but it also had fewer jobs for immigrants during lockdown. After lockdown, applications for immigration spiked. Also job openings spiked in sectors where US-born workers already changed careers. Here’s a look at the backlog.
Ok, so we know there’s a backlog of folks that want to live in the US. I’m going to assume they want to work here as well. We know there are job openings. Tying back the earlier graph about r/antiwork, people want more money, more flexibility, and to just be treated better in general. I don’t think it’s a stretch to say if employers don’t want to do any of those things they need to hire people who are more desperate. While wages are going up, job openings are going up faster.
I hope it’s not too controversial to say that if employers don’t want to offer more to employees, they are going to need to hire foreign born employees. Please don’t think I mean it’s best for society that small businesses take advantage of people, quite the opposite. All I’m saying is looking at the data, companies struggling to hire need to either offer more or offer the same to folks who need it more. Also according to the Economist, quoting Giovanni Peri and Reem Zaiour from UC Davis, there are 2m fewer working-age immigrants in the US than before the pandemic.
At the end of December 2021, there were 1,596,193 pending immigration cases and growing at a seemingly exponential rate. Biden’s perceived softer stance on immigration, as well as the pandemic, have encouraged the highest immigration attempts in history. The average wait time is 2.5 years and up to 4 years for asylum seekers (I thought there was some kind of correlation between the word ‘asylum’ and ‘urgency’).
Let’s also look at what has been growing: Amazon. I can’t find recent employment data on Amazon, but this chart is through 2020.
During the Pandemic, Amazon added 500k workers while other industries lost workers. It’s safe to say the 2-day free delivery has taken a huge chunk of the labor force away from other industries.
So we have fewer foreign-born workers, a lower labor force participation rate, growing non-service-sector jobs and a whole movement dedicated to exposing just how bad employers in the US treat their workers. We also have a record-high number of people knocking on the US’s proverbial front door for a place to live and work. I’m not here to make policy recommendations, but there’s no sense in ignoring the supply-side. If society thinks we should fill jobs with the work force living in the country today, it’s clear the work force is demanding more.
I particularly love these types of conclusions that turn both Democrat and Republican headline ideologies against each other. I’m sure there’s smart policy folks on both sides that can reconcile this contradiction.
Well that’s all I got. There’s a lot more data and a lot more to this story, but hopefully this is a start. What are the solutions you may ask? The US has jobs, let’s let in folks to do those jobs. On a personal level, I’d like to see wages rise, particularly for teachers and nurses and anyone else who puts in a concerted effort to build the machinery that powers our society. I’d also like to see people be more grateful for service industry workers. I’d love to see a world where we move from the ‘Have a Nice Day’ service-sign-off to a ‘thank you for the help’. Personally, I don’t really need anyone to be unrealistically fake nice, just don’t be realistically mean. My employer pays for my help and I’ll absolutely never tell them to ‘have a nice day’. To be fair, I’m not going to say ‘fuck you, pay me’ either. I’ll land somewhere in the middle.
- Quick aside, a lot of folks are upset with me because I didn’t explicitly tell them I sold a specific stock. First of all, see my post where I announced I’m selling 60% of all $MEME stocks. If that’s not enough, feel free to make your own decisions about selling. Once you double your money I don’t care what you do next. Sell, hodl, whatever. I did my part. Every dollar that is invested should have an investment thesis and every day that thesis should be evaluated. I understand it’s not practical to do every day, but once the thesis is either achieved or no longer valid, sell. Simple. That’s how fund managers work. They set a target, say a 20% IRR and 2x multiple. Once they hit it their return in the set investment period, they sell. It’s mechanical. The only reason to hold would be if they reevaluated the current state of the investment and underwrote, say, a 20% IRR and 2x return in the next holding period, say 5 years. Also, this blog is about uncovering rare market anomalies controlling for the current macro economic environment sprinkled with a bit of technology because, hey, market anomalies arise because people don’t understand the implications of technological innovations. Its this very misunderstanding and uncertainty where you can make a short-term buck. As you all know, long term I’m holding a lot of Vanguard funds and BRKB (I’ll buy an A share before I die). I’ve never claimed to to know what will happen in the long-term.