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Are We Entering the Era of Full Employment?

Last week the Labor Department announced that the U.S. unemployment rate crept up to 4 percent in June, but for promising reasons, as hundreds of thousands more Americans sought work. In fact, for the first time in recorded history, the number of job openings is now greater than the number of people seeking work. That trend has raised hopes that wage growth might finally begin to accelerate, with employers offering more pay and benefits to attract new workers, and offering raises and bonuses to keep their existing employees.

Full employment — that gold-standard of the modern economy, where everyone who wants work has a job at a good wage— finally seems near. And across much of Iowa, it seemed to have fully arrived. Out of every 100 people who want a job, 98 or 99 have one. The pace of wage growth recently doubled, and businesses are struggling to find workers. “It does feel like things are a little different in the last year,” Elisabeth Buck, the president of the United Way of Central Iowa, told me. “Businesses are getting a little desperate.”

Des Moines and the surrounding metropolitan area may be good examples of what’s coming for the U.S. economy, both positive and negative. Full employment is a powerful force for improving the lives of low-wage workers and bringing new people into the workforce. But it also shows that scars remain, even in a hot economy.

Around the U.S, but particularly in central Iowa, the low unemployment rate has steadily tipped the balance of power towards workers and away from employers. Iowa residents are now able to comman higher wages, better working conditions and benefits, training programs, and lots of other desirable perks.

In fact, competition for workers has gone crazy, as Joe McConville, who owns a popular chain pizza restaurants, told reporters. “At almost every restaurant that I’ve worked at, you always had a stack of applications waiting,” he said. “You’d call somebody up and half the time they’re still looking for an extra job. That’s not happening anymore.” He said he faced a “black hole” when he began seeking experienced twenty-year-old employees, and in order to lure them in from the competition he has to offer higher pay and additional vacation.

In addition, Iowa’s labor market has compelled employers to offer training, extend feelers out to new worker populations, and take applications from those they might not have considered before — growing and up-skilling the overall labor pool as a result. “Their attitude really seems to be changing,” said Soneeta Mangra-Dutcher of Central Iowa Works, a workforce-development nonprofit. “They are looking at populations differently, who they should be looking at when they have jobs to fill, or people being screened out for things that really don’t have an effect on the job.”

Some of the populations having better luck getting hired are the formerly incarcerated. When unemployment rates are higher, many businesses won’t look at applications from people who’ve spent time in jail — even for non-violent offenses or for violations that occurred years or decades ago. That was what Clifford Salmond found after being released a few years ago. “I couldn’t find a decent job because of my background and my past. I’ve had alcohol problems, drug problems, incarceration problems,” he told me while he ate breakfast at a local McDonald’s. “Once I got that behind me, I still found finding employment pretty hard.” He landed work washing dishes, but then found himself unemployed again when the restaurant shut down.

But his daughter got him enrolled in a training program, and that led to a job at a factory in Des Moines. “I take the raw rubber and I break it down,” he explained. “I send it over to be [combined] in a machine with fabric. That leaves the machine, and goes to the tire builders, and they build the tire.” He said the work was hot, dirty, and physically exhausting, but he actually loves the job, where he now earns $21 an hour, and even health benefits.

Younger and older workers are having more luck as well, according to labor experts in central Iowa. Businesses are taking applications from high-schoolers and retirees who want to come back to work — and even offering on-site education and accommodations like flexible schedules. Mollie Frideres works as the human-resources director at Green Hills Retirement Community in Ames. The company usually seeks workers from a pool of Iowa State students who want to going into healthcare careers, she told me. But recently, the strong economy has meant fewer undergrads need a job. Even after raising wages, it’s still come up short.

As a result, the company created a program that partnered with the local high school, training the workers the business needs. Those teens need quite a bit more hand-holding since they have less experience and maturity. As Frideres explained, “We are in the process of developing some classes or training programs on social skills or soft skills for them,” she said. “You know: What is professionalism? What are our expectations?” But they had filled the gap, she said.

Refugee and immigrant workers — including those with literacy or language challenges, or a lack of credentials — were also getting drawn in and picked up. “A little over a year ago, I hired a woman that focuses on this kind of high-touch service,” Bontrager told me. “She has 40-some clients we’re working with, specifically on helping them work through some of their barriers, whether that’s going back and recertifying in something [here in the United States], or working on the language skills, or working on how to present themselves — their resumes, how to interview. All of those kinds of things. Companies are really being very receptive to taking a little more time, if you will, in the hiring process.”

Some analysts have started warning about the same issue happening nationally, in some cases in pretty overwrought terms. The “number one problem [for businesses] is finding qualified workers,” Mark Zandi, the chief economist at Moody’s Analytics, said in a statement this week. “At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes.”

Yet the experience of towns like Ames and Des Moines show that such “labor shortages” might be due to insufficient wages and crummy working conditions — not an unwillingness of workers to switch industries or improve their skills for a job. The trucking industry is instructive here: Trade groups have argued that it is facing a shortfall of 51,000 workers, yet businesses have not yet shown much willingness to cut hours, boost pay, and improve conditions to lure workers in. Indeed, across the economy, companies have shown a remarkable unwillingness to boost wages, with growth barely keeping pace with inflation even as the unemployment rate has dropped to 4 percent.

That is even more true for the economy as a whole, with hundreds of thousands of workers still choosing not to join the labor force and wages still flat — as the White House has kicked off a trade war and interest rates have started to rise, no less. Full employment stands to help, but only over the long-haul.

 

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Emery Reddy