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The Great Awakening

The pandemic, labor shortages, and a supply chain debacle have opened our eyes to many subjects like immigration, wages, retirement, remote work, working conditions, and many other factors that impact our everyday lives. These major events have provided clarity around many of these issues and on this episode Andrew Flowers, Labor Economist with Appcast sits down with The Chad and Cheese to start digging into a wide variety of these issues.

Because at the center of all the economic banter is, TALENT!


INTRO (1s):

Hide your kids lock the doors. You're listening to HR is most dangerous podcast. Chad Sowash and Joel Cheeseman are here to punch the recruiting industry, right where it hurts complete with breaking news, brash opinion, and loads of snark buckle up boys and girls.

Joel (20s):

Oh yeah. What's up everybody. It's your favorite guilty pleasure. The Chad and cheese podcast I'm your cohost Joel Cheesman joined as always by my partner in crime Chad Sowash.

Chad (32s):


Joel (33s):

And today we're talking economics, everybody on the show. Andrew Flowers, Labor Economist from Appcast. Andrew, welcome to the show.

Andrew (46s):

Hey, thanks for having me. I'm excited to be here now.

Joel (48s):

You sound excited. Well, aside from labor economists, what should our listeners know about Andrew Flowers?

Andrew (55s):

Well, I am a dad, a husband, and a fan of a really, you know, a underdog football team, the New England Patriots.

Chad (1m 6s):

So, so your new QB is starting to come around. That was a hell of a lot quicker than I think anybody thought would actually happen. So you've gotta be happy as hell right now.

Andrew (1m 16s):

Yeah. It's going to be exciting. This offensive rookie of the year, Mack Jones, you know, pencil it in. It's a fun time here in new England and Massachusetts, but I'm not all play. I'm not all only just sports up. I do love talking about data and economics and all that nerdy stuff.

Chad (1m 37s):

Which is what we're going to do today. That's for sure.

Joel (1m 41s):

Our listeners need to know you're also a former Indeed employee, which we will not hold against you.

Chad (1m 45s):

But he got out.

Joel (1m 46s):

Yeah, he got out.

Chad (1m 48s):

Yeah, he did get out.

Andrew (1m 49s):

Yeah. And in former former Federal Reserve, 538 guy. So all the places that people sometimes love to hate on, but...

Chad (2m 1s):

Federal reserve and also ESPN. I mean, that shit just doesn't mix. How did that work? How did that happen?

Andrew (2m 9s):

It's a great question. I think Nate Silver, when he left the New York Times and started 538 under ESPN, was looking for some people who knew data. And the Fed is one spot where I was a trained. So I was excited to jump ship, because again, you know, while the Fed was great, I'm a sports fan.

Joel (2m 28s):

We only have top-notch guests on this show. I just want to add that.

Chad (2m 31s):

That's good. Shit. Let me tell you that. Well, top-notch, who can actually use that big brain to talk about the great resignation? Are we sick and tired of all these greats that are happening in the great resignation? The great reshuffling, the great retirement. What the hell is actually going on?

Joel (2m 49s):

Explain it to me, Andrew.

Chad (2m 53s):

4.4 million people quit last month, right? So can we break that down a little bit? I mean, this all seems, yeah.

Joel (3m 4s):

Break it down like you were at a cocktail party.

Andrew (3m 6s):

Yeah. It's quit-y right. The upside of giving up of it, of quitting. And we see just these quit rates, which is just the share of workers in a given month who voluntarily, you know, leave their job. These quit rates are at all-time highs at 3% for all employees across the board, but it's particularly high for workers in lower-wage industries. And COVID sensitive industries to think of like retail or restaurant works workers. You see quit rates above 6% in September. And so quitting is really at an all-time high. And it's a big contributor that this great resignation is a big contributor to the broader labor shortages that I know employers face, that recruiters face, but let's just dig in for a second on like, what is, what is it?

Andrew (3m 56s):

Because some people think, okay, resignation does that mean people are just giving up on work and moving to a commune to, you know, grow their own organic food and, you know, leave the workforce. No, when people quit by and large, they quit because they think the economy is strong and because they have another job lined up.

Chad (4m 18s):

Okay. Well also, and let's get into the psyche of workers, right? Because we've called them central. We have all these really minimum wage workers who we've gotten really, I think, into their psyche called them essential. Now they understand that they are essential for the supply chain, but yet they're not receiving essential wages. So do you think that because of, not just because of COVID, but also because of many of these people seeing that they were essential to moving and keeping the economy running, that they believe they deserve more cash and you know, maybe a better existence in life.

Andrew (5m 4s):

I think there's definitely something to that. That workers, particularly lower-wage workers, those frontline essential workers are talking about. They realize that this is their moment to strike that. Not literally strike though. In some cases, you'd see strikes at John Deere and other places, but this is their moment to take advantage of the leverage that they have given that it's a really difficult time to fill open positions if you're a recruiter. And so the workers in these industries who are switching jobs, we find based on data are actually seeing the largest wage increases, right? So wages are going up in general for all workers, but particularly for lower-income workers, lower-wage workers, and particularly for job switchers.

Andrew (5m 46s):

So that's part of t you can call it the great resignation. I also call it a poaching phenomenon where workers know that they can get a better job. It doesn't mean that they're leaving their industry per se, but they're taking advantage of the tight labor market and getting a raise by switching jobs.

Joel (6m 2s):

And what role does the gig economy have on the frontline workers? How many are just, you know, driving Uber's and delivering Door Dash instead of working at a full-time job and how does the government calculate gig jobs if they do it all?

Andrew (6m 20s):

They really don't. That's a great question. The monthly jobs report that gets all this press attention about, you know, how many jobs we created that headline number comes from surveys of businesses that, you know, are reflecting on their payroll, like the actual full-time workers. And so they don't count gig workers. Now, when you call in other surveys, when the government calls people and say says, Hey, do you have a job? And if they, you know, drive for a delivery service, and so they're a gig worker, they can respond, yes, I have a job and so they're counted in those surveys, but typically in terms of employment, no, it's gonna miss a lot of gig workers. The bureau of labor statistics does do a, what they call a contingent worker survey, a gig worker survey, but it's not regular.

Andrew (7m 3s):

The last data came out, I think in 2018 or 2019. So it's way out of date and really stale. But to your point, in terms of gig workers and how they're adjusting in this environment, I think it makes good work relatively a really hard sell for a lot of workers, because if you have open opportunities and we have 10.4 million job openings in the U S and a lot of them are in full-time salary positions and employers are just desperate to hire. So why would you necessarily take a gig job if you have those openings to, to choose from? And so it really comes down to do you prioritize flexibility in your schedule? Do you like the fact that you set your own hours?

Andrew (7m 45s):

And in our data at Appcast, we find that recruitment costs for gig work has just exploded and unsurprisingly, right? Who wants to necessarily drive when there are COVID risk, when there are other opportunities out there. Again, we have solutions for gig employers, but it's just a challenging market to recruit gig workers, period.

Joel (8m 7s):

So is it your consensus that the gig economy is having very little impact on people leaving the workforce and doing that based on your comment around recruiting, you know, Uber drivers and Door Dash delivery folks is so challenging. Is that what I'm hearing you say?

Andrew (8m 25s):

Yes. I think the rise of quitting is not really explained by gig opportunities. The rise of quitting is explained by the red hot labor market in the fact that they can get these workers who quit, they can get raises, they can get better pay and in some cases they're reassessing their careers, right? That they're reassessing whether they want to work in a restaurant position, and for older workers, they're reconsidering work altogether. So one thing that's a part of this great resignation is retirement, which surged during the pandemic. And so whether that reverses, whether some of those folks who are near retirement age, who, you know, wanted to say, I'm done with work, I'm retiring now, whether they come back into the labor market, we'll see, but retirement surged in, and that's a factor as well as part of this broader labor shortage.

Chad (9m 16s):

But aren't we seeing really the definition of work changing now that we have we've all felt this remote work from home situation, I guess you can say. We have reports where individuals are actually working two full-time jobs. I mean, it's like, we feel like to me, this is the great awakening. You have the blue collar types of workers who are essential, and now they know they're essential and they're going to get their cash. Then you have the white collar, remote workers who were told for years that they had to go, you know, into the office. And out of nowhere, they didn't right. They got to work remote.

Chad (9m 58s):

So, I mean, it just feels like there are so many different aspects of how we work. And as we're talking about gig, why wouldn't we move more toward a flexible project type of situation, as opposed to just FTE and part-time.

Andrew (10m 13s):

This is a huge issue and I think the answer is yes, that worker expectations around remote work are shifting because the forced experimentation that a lot of the economy had to go through during the pandemic, reduce the stigma around work from home, right. And pre-pandemic, yes, tech workers, white collar workers, higher skilled folks did work from home at reasonable rates, but it was still kind of a fringe thing. Well, post pandemic or knock on wood, post pandemic we'll see if it actually, you know, resolves, but in, in 2021, 2022, the stigma around remote work has if not evaporated, it's reduced significantly.

Andrew (10m 56s):

And when you poll workers, when you survey remote workers and some economists have done this, and you asked them, Hey, are you more efficient? Are you more productive? By and large they say, yeah, remote work has been a huge success.ZI'm getting a lot more done. I'm not commuting. I can pick my kid up from the bus. I can make it to meetings on zoom without, you know, doing all the transportation and rigmarole around that. People feel who work remotely people feel like they're more effective and so now there's this really dividing line between workers who desire on average to work from home two, two and a half days a week. On average, again, in the aggregate, there's a dividing line between them and the employers who are a little more stingy than their own average expecting they're planning for after the pandemic to offer the average worker, the opportunity to work from home on average one day a week.

Andrew (11m 50s):

So there's this chasm that has to be negotiated it's a bargaining chip now.

Chad (11m 54s):

You rule that one day is another reason why people are quitting, right? Cause they're calling bullshit. Right? I worked for five days or even more from home before. So, I mean, it's really interesting that we're having this conversation and there's a negotiation happening where employers still believe they have all the control. Because they don't, they're the ones who actually need to fill the positions so that they can write the code to make the widgets, et cetera, et cetera, et cetera. Do you feel like the control is going to start to move more toward the employees and will it stay there? Just looking at the numbers?

Andrew (12m 35s):

I think it already had started to move towards worker empowerment because when you just look at the supply demand, right, economics 101, there's just a fundamental mismatch. I mentioned this number earlier, but job openings in the US hit 10.4 million. And the number of unemployed people is 7.7 million. Well, that's pretty easy math. That gap means that there's almost 3 million more job openings than there are unemployed people. And so this fundamental supply demand mismatch, and it wasn't, it's never been that high that gap has, is the highest in the history of the data that we have. So workers know that. They know that hey, wages are risingm they're up 6, 7% nominally compared to where they were pre pandemic.

Andrew (13m 18s):

And they're up even more for lower wage workers, they're up 8, 9%. And so they know that workers know that they have leverage in this market. That's part of the reason why they feel empowered to quit their jobs. That's part of the reason why they feel empowered to ask for remote work as a key benefit and how that plays out. Again we've had several decades now where wages have been pretty stagnant. The median wages, you know, worker compensation as just a slice of the pie has declined steadily over the last few decades. And whether the COVID pandemic and recession is a inflection point that starts to empower workers. You know, it's too soon to tell, but it's a possibility.

Joel (13m 60s):

Curious your thoughts on inflation. And I'm hearing a lot more in the news around, that it's almost a wash that salaries are raising hourly wages are raising, are rising, but so is inflation. And some reports that I've seen recently are that it basically equals out. And when you calculate the cost to now buy a home, which is now quite a bit more than it was before the pandemic and other, other things like cars, I mean, at the end of this, do we just say we've been running in place for the last two years?

Andrew (14m 32s):

There's certainly something to that because yes, inflation is at a 30, 31 year high, right? Consumer inflation was up a 6.2% year over year recently, that's really anomalous for the last few decades and how it translates to real wage gains, in other words, inflation, adjusted wage gains. On average, you would, when you do the numbers, it looks like it's basically flat. Like, yeah, wages are rising, but inflation is eating into that. But here's where it gets interesting, wages are rising fastest, the lower you go down on the wage spectrum, and they're pretty stagnant they're rising just barely for higher wage workers. So in effect, this inflationary episode that we're living through is reducing inequality in terms of its its wage compression, where actually the lowest wage workers, because they're getting such huge, you know, wage increases that exceed inflation, they're getting real wage gains.

Andrew (15m 30s):

Whereas middle-class workers, higher income workers, they're probably getting on net, it's a wash or, or they're actually reducing their purchasing power because it's just rising too fast, prices.

Chad (15m 42s):

So the people that need the money are actually finally getting the money. We've been fucking them over for the last 40 years. And remember, we're not paying, we're not giving them any reparations either, but don't you think that we're seeing that there's more money in bank accounts. There's more, there's more spending power at the lower rungs that obviously along with ships at the docks, right? When, when, when we start to see, when we start to see the ships at the docks, I mean, the wages, the, the beautiful part about the wage gains is that they're going to stay there, right? Knock on wood. The ships at the docks, this is a moment in time that we're just going to have to get through.

Chad (16m 22s):

So do we see, as we start to get all of those supplies back into the supply chain, does inflation start to then level out.

Andrew (16m 32s):

That's what most economists, think in how long that is going to take to really unclog these bottlenecks, you mentioned, you know, the ships who are docked off of the port of Los Angeles or docked off of Savannah or these other main shipping centers. And it's taking, you know, months for goods to work their way through the transportation chain. And we have these supply chains that are ensnared in bottlenecks. And so it's going to take a few quarters for this to process out, but a lot of professional economic forecasters do expect inflation to subside as those bottlenecks are worked through. Because when you look at the actual inflation numbers, it's really inflation in goods in things right, appliances and cars.

Andrew (17m 17s):

And if you have renovated your home during the pandemic, like building materials, those costs are going up. The cost of services, right, haircuts and movie theater tickets and restaurants, those services prices haven't gone up as much as actual goods prices and the reason is, is because of the supply chain bottlenecks, which again, knock on wood, will take some time to resolve themselves and we'll see inflation, moderate that. The key thing to watch though, is the thing that could spiral us into a disaster is if we get, if we get a wage price spiral, and what is that, it's when realize, Hey, the price of gas, the price of milk is going up. I need to have a pay increase. And the employer says, you know what?

Andrew (17m 58s):

You're right, here's your pay increase. And the employer to pay for that pay increase raises their prices. Well, that just, it's a self fulfilling prophecy. It's a loop where the wages keep getting raised, the prices keep getting raised and so forth and so on. And if inflation expectations of consumers start to get unanchored from where they've been the last few decades, that's where we get in a bad zone of ever rising prices.

Joel (18m 23s):

I don't think immigration gets enough sort of publicity on this topic. And you have some thoughts on that and your presentation that you did recently talk about immigration and how the lack of new people coming into the country impacts this whole equation.

Andrew (18m 38s):

Yeah. It's a huge factor in terms of labor shortages in terms of recruiting. And let's break it down into two parts, there's the short-term impact of immigration changes, and then there's the longterm. So just during the pandemic, it's estimated that the Us economy lost about a million workers, just by visa processing slowing down, that when you look at the kind of eligible visas, the temporary work eligible visas that are issued by the US government, well, those visas started to just go to zero, right, because of public health concerns and border closings. Well, a lot of industry suffered because they rely on those temporary work visa workers.

Andrew (19m 21s):

And so that's the short-term impact. Now, knock on wood we're speaking in November of 2021, just a few weeks ago, our land borders opened up with Canada and Mexico and visa processing will hopefully continue to increase as, knock on wood, the virus subsides. So that's the short-term factor, that's a temporary impediment. But the bigger factor is the second one, is the long-term factor and just, this is where demographics come in the US economy's working age population without immigration, it actually declined last year in 2020. And over the decade from 2010 to 2020, over that 10 years, our overall population growth was the slowest it's ever been, in a decade.

Andrew (20m 6s):

And so as fertility rates or as birth rates are declining, and as we have kind of immigration not coming in to solve the worker shortage, we're going to face a future where just the pure math, the demographics, mean that workers are ever more scarce. And it's going to empower workers relative to employers in the long run, unless we do something about immigration, because again, our working age population is projected to decline in the US in the future without immigration.

Chad (20m 35s):

So what I'm hearing is tear down that wall.

Andrew (20m 38s):

Well, I think you're going to hear it from businesses. I think the U S Chamber of Commerce, I think, I think a lot of recruiters, businesses that even have maybe, you know, conservative inclinations politically, are starting to realize that they just can't get workers unless we tackle our immigration standoff, but politically we need to come to some resolution.

Chad (21m 1s):

Yeah, well, and taking a look at that, and also supply chain, we were just talking about inflation. Supply chain obviously is a huge impact on inflation. Immigration, we can't have immigrants coming in and actually doing, I don't know, the trucking jobs, the driving jobs where we're having supply chain issues as well. I mean, this all seems to be lining up pretty nicely for us here in the United States to really start to understand how immigration does positively impact our life, our livelihood, how, what we pay for things, right. And also the jobs that nobody wants to do. We have enough American drivers out there, but they're doing other jobs now.

Chad (21m 44s):

So I guess my big question around this is, do you start to see the picture much more clearly after COVID because all of these things, all these, these crazy pandemics and supply chain issues have pretty much come together, has it made it easier for you to actually see what the problems are?

Andrew (22m 4s):

It has clarified some things. And I think, you know, immigration and worker shortages is one part of that. And so just to piggyback off of what you said, I want to tell you a pretty wild story. I was speaking to a head of talent acquisition at a trucking company. I won't say who, but this woman said, you know, we had a crazy idea because we were so desperate for CDL drivers that we tried to call the US government and find out where are the Afghan refugee settlements in the US and can we get those refugees if they're eligible to have CDL licenses and become drivers?

Joel (22m 39s):

That's awesome.

Andrew (22m 39s):

That's what she told me that they're trying to explore that as a possibility, because that's how dire it is for trucking. But to go to back to your broader point, the pandemic has clarified a lot of things, right? It's shed light on what you mentioned earlier, Chad about essential workers and low pay and working conditions. It's clarified a lot of things in terms of remote work is definitely here to stay. It was a huge success. It has clarified things about supply chains and how fragile they are, and this kind of multi-decade trend of let's have globalized value chains with, you know, just in time delivery that are going to be very efficient. Well, that works great until it doesn't until there's bottlenecks.

Andrew (23m 23s):

And so it's clear that the pandemic has shaken a lot of assumptions among the economist and the dust is still settling. And it's too soon to tell whether some of these changes are permanent, but that's what makes it so interesting and so challenging in this moment.

Joel (23m 38s):

We have a lot of recruiters and employers, obviously, who listened to the show and you give some pretty pertinent advice in terms of recruiting. And I want you to talk about your comment that you to play small ball. What exactly do you mean about that? And also on retirement, you talk about retirees coming back to work. So what advice would you give on the recruiting side to play small ball and get those retirees back to work?

Andrew (24m 4s):

That's a great question. And small ball basically means that there are aspects about recruiting that recruiters can can control. And there are aspects that you can't control. You can't control the fact that there are 3 million more job openings than unemployed people, right? No one company or one recruiter has the power of the federal reserve to set interest rates or to, you know, move the whole macro economy. So when we talk about small ball, we're telling recruiters, Hey, this is really challenging right now we get it. But there are small tweaks that you can do to optimize in this environment, such as making your apply process as efficient and timely as possible, not dragging applicants through a kind of obscure and clunky process, just get the basic information, have a skinny apply flow and move on.

Andrew (24m 55s):

Also with your job ad content, really paying attention to job titles, selling yourself. If you can offer remote work, selling that as a benefit, or just mentioning your benefits, period, writing a good job description, right? And we have a lot of advice on job ad content. Again, that's a form of small ball, one other important part of small ball that it we've already spoken about is wages, right? Benchmarking wages is a process that HR and talent acquisition leaders go through in terms of, you know, what are we offering? Are we competitive? Are we at market? Well, that process was maybe an annual process or a quarterly process, but the world is moving so fast benchmarking wages just needs to happen at a almost monthly basis now because you're being out competed by, you know, large employers who are quickly raising their wages.

Andrew (25m 45s):

So those are just some of the recommendations we give out when we talk about playing small ball. And so finally, when you talk about retirement and how to, you know, coax those retirees out of retirement, this is actually an important point because when people think of retirement, the traditional model is you know, you get the gold watch and the handshake at a party, and then you're done, right. But a lot of retirees, like a shockingly high percentage at some point unretire and go back to work for a bit. And I think the key factor there is going to be the virus. I think virus fears as vaccination rates, knock on wood, continue to tick up with, you know, the Pfizer vaccine for children and as just hopefully cases subside.

Andrew (26m 29s):

I mean, the Delta variant spike this summer was worrisome and probably kept a lot of older workers who are most vulnerable to the virus, those retirees that probably kept them out of the labor force. But if the recent down tick, but again, it's unclear whether it's truly a down a downward trend in the virus. If virus actually gets under control and workers, older workers feel more safe about returning to the labor force, then that can be a factor to recruit those retirees that accelerated, they brought forward their retirement, but you can bring them back in the labor force.

Chad (27m 2s):

Yeah. So much good stuff, Andrew I'd unfortunately we don't have any more time cause your big brain is needed elsewhere. Everybody this is Andrew Flowers, the big brain economist over at, Appcast. Andrew, if people want to find out more, you've got videos on this. I mean, you go into some really great detail. Where can people find out more about you, maybe connect with you and also dig deeper into some of this information.

Andrew (27m 27s):

Thank you. It's just been a pleasure to be here, but the two resources I'll call out are one go to, check out our website. We have a lot of great resources in terms of blogs about the labor market videos. And then the second resource is find me on Twitter @AndrewFlowers. Pretty simple. That's my first and last name Andrew Flowers. Follow me, DM me. I'm more than happy to speak with you or find me on LinkedIn as well. And again, this has just been a pleasure, Joel and Chad and I love talking about this stuff.

Chad (27m 60s):

Excellent, man, we appreciate you taking the time and we'll probably bring you back, you know, maybe dig into some of these a little bit more because we enjoy the economics of what we do and we know that our listeners do as well.

Andrew (28m 15s):

Thank you.

Joel (28m 16s):

Love it. Another one in the books Chad.

Joel and Chad (28m 20s):

We out, we out.

OUTRO (29m 12s):

Thank you for listening to, what's it called? The podcast with Chad, the Cheese. Brilliant. They talk about recruiting. They talk about technology, but most of all, they talk about nothing. Just a lot of Shout Outs of people, you don't even know and yet you're listening. It's incredible. And not one word about cheese, not one cheddar, blue, nacho, pepper jack, Swiss. So many cheeses and not one word. So weird. Any hoo be sure to subscribe today on iTunes, Spotify, Google play, or wherever you listen to your podcasts, that way you won't miss an episode. And while you're at it, visit just don't expect to find any recipes for grilled cheese. Is so weird. We out.


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