An Article Review on Advantages of Labor Shortages

Introduction

Ross Gittins writes about the perks of labor shortage to a country and its citizens, a common economic problem whose solution has not been fully achieved. The article addresses issues such as the influence of salary margins and a pool of unemployed citizens on the decisions made both within and outside a particular country. As explained in the article, labor shortages are not fully influenced by a country's government. Instead, they are influenced by a country's political climate, workers' preferences regarding wages paid, and benefits that a company is willing to provide its workers, which are essential economic issues modeling a country's prosperity.

Labor shortages influence political decisions and ease of shifting jobs and result from workers' preferences and companies' unwillingness to improve working conditions. Using case scenarios, the researcher shares an interview on the impact of unemployed nurses on political influence in Australia, where political influence led to the employment of many nurses previously in the waiting pool (Australian jobs: Why labor shortages can be good for you and the economy, 2022). This argument proves how during peak political tension moments, unemployed workers are used by political candidates to fill gaps in various civil servant positions, a decision that may not positively impact the country's economy. In addition, high unemployment cases may not necessarily be a negative indication of an economy's performance because the counterargument may assume that an economy with high employment has a workforce equipped with the skills required for the jobs available, which is rarely the case (Australian jobs: Why labor shortages can be good for you and the economy, 2022). Particularly, such economies may have a better chance of employing more qualified workers for the jobs available compared to an economy with a saturated workforce pool. Also, labor shortages could reflect citizens' work and salary preferences, as seen in countries such as Canada, Australia, and Nevada after the COVID-19 outbreak (The post-COVID-19 rise in labor shortages, 2022). For instance, in previous years, companies and journalists have reported on the shortage of workers, such as teachers and manual job workers, without giving insight into the causes of inadequate workers compared to the large pool of unemployed citizens. The same can be answered when an economic investigation proves that workers demand higher wages that their employers are mostly unwilling to pay, and monthly benefits that companies give, which are meant to entice workers to continue working for underpaying companies. Relating to employers, unemployment could reflect the unwillingness of many companies to train their workers and continually instill a work culture in them (Australian jobs: Why labor shortages can be good for you and the economy, 2022). Additionally, labor shortages could favor employers since the chances of existing workers switching jobs are narrow when an economy is not competitively recruiting workers. Companies can therefore worry about improving the quality of their products and services instead of recruiting more workers to improve their services. Additionally, the author asserts the benefit of full employment on the prosperity of a business; that is, full employment results in increased demand for goods and services provided by a business, which are in high production.

Significance

The issues addressed in the article are significant since employment rates directly influence a country's economy. Through work, citizens have a source of income to sustain their livelihoods. Additionally, the country's economic growth depends on taxes paid by its citizens, their assets, and ventures, which is possible when citizens are employed. The article explains issues of inadequate training, workers' unwillingness to enroll in jobs, and companies' incentives that do not meet workers' needs since most workers demand higher pay. Therefore, through the article, economists can analyze whether labor shortages are a disadvantage in an economy and make interventions to increase employment opportunities and improve the working conditions of employed citizens.

Article’s Argument Conviction

I agree with the author’s assertions on the direct implication of labor shortages on an economy. For instance, in the U.S., CNN reported an increase in unemployment in the population while various companies experienced difficulty in recruiting workers (Wolf, 2022). Many citizens attributed this anomaly to the few operational benefits that most companies provide, without a reduction in working hours or redistribution of work to reduce the burden on a single worker (Wolf, 2022). Reduced wages have also influenced the decision of many citizens to stay at home without sourcing for jobs. Due to such factors, it is easier for small businesses to find workers compared to big companies, which are unwilling to increase wages and customer benefits (Wolf, 2022).

Macroeconomics and Economic Theory

Macroeconomics relates to various factors within a country, a region, and globally, affecting a state's or nation's productivity. The article discusses the trends in the economy that have influenced employment opportunities and the decisions made by major economic drivers such as governments and employers which affect national and global economies. The author employed an empirical economic model to study issues in the real world, that is, labor shortage, study its causes and create a theory explaining already-existing trends. The article's neoclassical economic theory is evident since the author explains the correlation between labor and output and demand and supply in the economy (Porumbescu, 2018). The neoclassical economic theory best explains labor behaviors in the economic world. For instance, the theory explains reasons for labor migrations, which, as seen in the article, may include better pay, higher benefits, and proper company training (Porumbescu, 2018). Additionally, through the theory, the nature of labor, including their choice to engage in economic activities, is seen and could be improved if employers can change their structure and reduce rigidity on the salaries, wages, and benefits they are willing to give their workforce (Porumbescu, 2018).

Conclusion and Criticism

The article is accurately written since the author discusses issues influencing employment rates in the economy, which has been proven by other economists who observed similar findings in the U.S., where high unemployment was not a reflection of unavailable jobs. Additionally, the author discusses reasons for unwillingness among citizens to work, which various economists have observed. These include inadequate pay and employee motivation. These factors are key in maintaining a nation's economic productivity and, therefore, its growth. Additionally, the author shows mastery in research by quoting speakers, referencing other economic works, and giving statistics that accurately depict the article's main arguments. Since the arguments discussed are well supported by sources, the author's work is unbiased.

References

OECD Economics Department Working Papers, 2022. The post-COVID-19 rise in labor shortages. https://doi.org/10.1787/e60c2d1c-en.

Porumbescu, A., 2018. A critical perspective on neoclassical economics and labor migration theory. Rev. Universitara Sociologie, p.8. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/rvusoclge2018&section=23.

Smh.com.au. 2022. Australian jobs: Why labor shortages can be good for you and the economy. https://www.smh.com.au/business/the-economy/why-labour-shortages-can-be-good-for-you-and-the-economy-20220906-p5bfod.html.

Wolf, Z., 2022. Here's the truth about the labor shortage | CNN Politics. CNN. Available at: https://www.cnn.com/2021/05/22/politics/what-matters-labor-shortage/index.html.