American workers have the upper hand over their employers right now — and there are tentative signs it could last, even as economic storm clouds gather.
Why it matters: Put simply, your boss needs you more than you need her. And it might stay that way, at least for some workers, particularly those on the lower end of the wage scale.
The big picture: There just aren't as many workers these days, as demographic forces were supercharged by the pandemic.
- "The labor supply has shrunk, which gives workers more leverage, more bargaining power and pushes employers to compete harder and improve job quality," Aaron Sojourner, a labor economist at the University of Minnesota, tells Axios.
State of play: It's a tight labor market, with unemployment near a record low. And, crucially, there are jobs! jobs! jobs! for almost everyone who wants one — 1.9 jobs for every unemployed worker according to the latest BLS data.
- Headwind ahoy: Fed chair Jerome Powell called this labor market "tight to an unhealthy level" in March, when there were 1.7 jobs for every worker. The Fed is raising rates in an effort to cool things down, which could mean higher unemployment rates.
Yes, but: There are a few reasons workers may emerge from this tightening period with their power intact:
- Baby Boomers are finally leaving the stage. Labor force participation for those 55 and older is nearly 2 points lower than in February 2020.
- There aren't as many Millennials or Gen Zers to replace them, as Axios chief economics guru Neil Irwin has written.
- People with long COVID, or who are facing child-care pressures or even dealing with substance abuse, are also missing from the labor force. So are a large number of immigrants.
And regardless of the tight market, a lot of folks may not be willing to put up with the same old mistreatment. They've been through a traumatic experience since March 2020.
- "A lot of people felt kind of pushed around," Sojourner said. "Either they were laid off or they were asked to do a lot of things they hadn't signed up for."
- Now those folks are rethinking their relationship to work. There's a "re-sorting" happening, said Chicago Fed president Charles Evans recently.
- That's good for workers and "painful" for some businesses. "[T]here are just a lot of businesses where their business model probably isn’t going to work the way it used to," he said.
What we're watching: Workers' empowerment is also creating the rumblings of a resurgence in union organizing, although unionization rates in the U.S. are still stubbornly low.
- There were 661 new union filings in the first quarter of 2022 — these are petitions from groups of workers seeking to hold union elections. That's up from 448 in the same quarter in 2020 before COVID, according to data tracked by Kevin Reuning, a political science professor at Miami University.
- Whether or not these filings result in newly unionized workers is the open question when it comes to worker power.
The bottom line: The pandemic-fueled demographic forces at play here tightened the labor supply to such an extent that even if the economy slows, these newly emboldened workers may get to keep their leverage.
