Editorial: The Ripple Effects of Low Unemployment

  • As is the case with many Upper Valley businesses, retail stores located in the Upper Valley Plaza in West Lebanon, N.H., on June 7, 2018, are searching for employees. (Valley News - Geoff Hansen) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

Tuesday, June 12, 2018

As problems go, low unemployment is not a bad one to have. But it is a problem nonetheless, as staff writer John Lippman detailed in the Sunday Valley News this week.

Lippman reported that the Upper Valley’s 2.2 percent unemployment rate means that employers in many fields are desperate for workers. A job search website carried listings for nearly 650 job openings within a 25-mile radius of West Lebanon last week, and it is common to see “We’re Hiring” signs at retail outlets. Among the employers Lippman talked to, jobs going begging included warehouse workers, drivers, massage therapists, child care workers, carpenters, painters, drywall installers, and construction superintendents and foremen.

This shortage of labor represents an obvious constraint on economic growth. If companies cannot hire the workers they need, they are unable to take advantage of opportunities to produce more of the goods and services that are in demand.

On the other hand, the situation puts upward pressure on wages. Lippman noted that many of the advertised entry-level positions for unskilled workers were paying slightly above Vermont’s $10.50 minimum wage and well above New Hampshire’s $7.25 per hour minimum. This is important because nationally, wage growth has not rebounded from the Great Recession anywhere near as robustly as corporate profits and stock prices. In fact, it is hovering in the 2.6 to 2.8 percent range, just slightly above inflation. When employers have to pay more to get workers, the positive effect ripples through the economy, creating a virtuous circle in which increased disposable income drives increased demand for goods and services, which in turn gives employers more opportunities to provide them. Meanwhile, income inequality is reduced.

That, of course, is not of immediate help to Upper Valley employers, who have to meet the daily challenge of recruiting and retaining employees. Some have taken new avenues to find workers. FujiFilm Dimatix, which makes industrial inkjet printer heads, has added new 10- to 12-hour weekend shifts designed to attract potential workers who are not available during the week. Others have turned to digital recruiting campaigns, while the Lake Morey Resort has developed a human resources program focused on employee recruitment and retention.

What other options are there? A Washington Post assessment of the economy that appeared on the same day as Lippman’s story provided one clue. Despite impressive job growth nationally in recent years, a smaller share of Americans are working now than in 2000. The labor force participation rate — defined as the total number of people working compared with the total number who could be working — is under 63 percent at present, compared with 67 percent back then. Thus there would appear to be some, or perhaps many, Americans who could be working but for some reason aren’t, although certainly the retirement of the baby boom generation accounts for some of the low participation rate.

To be sure, higher wages might entice some discouraged workers back into the job market, and increased compensation could also slow the ebbing tide of baby boomers flowing out of the labor force.

But companies may also have to look beyond the traditional labor pool to tap the potential of other kinds of people who want a chance to work, such as those with disabilities, recovering addicts and people with criminal records. Human potential is a terrible thing to waste at any time, but it is especially tragic when there is a strong economic incentive to make the most of that potential.