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Where Did the Workers Go?

Volume 92 No. 10 - October 2021

10-2021 Newsletter
Download PDF • 390KB

Technology creates, changes, and sometimes destroys jobs. We see this when we look back over time and we see this in our own time. Over 70 ice dealers appear in the 1900 Chicago City Directory. Among them, the Knickerbocker Ice Company boasted that it was one of the “largest ice houses in the world” and that it sourced its “ice from the principal lakes of Wisconsin, Northern Illinois, and Indiana.” They listed more than 40 branch offices and distributing stations across the city of Chicago.

Before refrigeration, ice dealers sold ice to homes and businesses to power iceboxes and keep food cold. With the invention of home refrigerators in the early 1900s and the introduction of home freezers around World War II, the need to buy ice from ice dealers declined precipitously. Most dealers closed shop, and the workers who kept the industry going for generations had to find new jobs and livelihoods. That took time as they learned new skills and found new professions.

While very few will argue against the benefits of the coming of refrigeration to American homes, this technological shift caused displacement among American workers. Most Americans benefitted from the change; however, others were hurt by it. Eventually, the American economy and Americans’ will to survive prevailed, and the displaced workers were absorbed into new jobs in new industries.

We are seeing something like this happen again today, but at a much faster speed.

Where Are Today’s Workers?

In early September, some 7.5 million Americans lost their unemployment benefits when state labor departments did not extend pandemic unemployment programs, according to the Century Foundation.

Yet, despite this reduction in benefits, many industries still struggle to find workers. The latest data from the US Labor Department, from the end of July, showed job openings growing 749,000 to 10.9 million. Even with weak hiring, average hourly earnings rose 0.6% in August, and were up 4.3% from a year earlier, surprising Wall Street analysts. Higher wages may be contributing to rising prices, and ultimately inflation.

If these workers now off the unemployment rolls need money, why are businesses struggling to find them and having to pay them more? It seems to go against the law of supply and demand.

Ice Cutters Don’t Always Make Good Engineers

In our August 2020 newsletter, we said that the pandemic had brought significant changes to society, “changes that likely would have come anyway, but [now] they have come much sooner.” We see these changes in the ways we eat, learn, play, shop, and receive healthcare, just to name a few examples. Those changes affect the lives and livelihoods of the people who power our economy.

During the pandemic, Amazon has experienced spectacular growth and posted extraordinary results. The market has reacted - AMZN’s stock has risen in value over 70% since March 2020, outperforming even the S&P 500’s pandemic-era growth (52%). However, COVID hit small businesses hard. Through June this year, 37.5% fewer businesses were open compared to January 2020, according to data compiled by a Harvard-led project called the Economic Tracker.

The people who ran—and worked for—these small businesses couldn’t just retool overnight and begin working for Amazon, much less for many of the other professions that are increasingly desperate to attract workers. A study published by LinkedIn indicates that the jobs requiring the longest time-to-hire are engineering, research, project management, business development, and finance, all at over 45 days. Those are not jobs that people can just decide to do and land in a matter of days or weeks.

Our pool of available workers may have grown, but that displacement will require time to resolve as people learn new skills for new jobs in a post-COVID economy. Our 2021 labor force is misaligned with our economy’s needs.

The Price of Labor vs. The Price of Digital-Age Solutions

While workers find their way back into the workforce, they need to reconcile the pay they get for their time and skills versus the real and perceived costs of reentering the workforce. Low-paying jobs like bagging groceries or making sandwiches may not seem worth the minimum wage-plus hourly rates offered by desperate employers—even amid signing bonuses, quick payouts, and other perks. Additionally, they may still be receiving government benefits in the form of monthly child tax credit payments helping cover their living expenses.

They may not want to risk contracting COVID, or they may have fundamental qualms about mask and vaccine mandates. They may have taken on other roles during the pandemic—like providing childcare for their families—and have decided not to return to the workforce.

Even before the pandemic, fast-food giant McDonald’s Corp was already testing voice-recognition software at its drive-throughs and robots to cook its food. In a world where employee staffing shortages force fast-food restaurants to close their dining rooms or even entire locations early, the cost-benefit analysis on investing in robot-employee technology starts to look much more favorable. Suddenly, robot employees are beginning to look like they may be worth the cost of capital, time, and resources they will take to implement.

Keep Calm and Invest Wisely

While the pandemic has challenged us in how we view work and how we approach nearly every facet of our lives, we see in our society the resilience and perseverance that have carried us through past crises. The amber lights of caution may still be flashing, but it is not too early to begin planning for a post-pandemic future.

Investment Counsel monitors the health and trends present in the markets and we analyze our positions and the companies we include on our approved stock list. As we always have, our stock list prioritizes companies with:

  • Strong balance sheets

  • The continued ability to pay dividends

  • The ability to weather “economic rainy days”

To this list, we now add companies that can adapt to the new labor market and the new realities of our 2020s economy. While no one could have foreseen how COVID would upend our lives, the age-old wisdom in seeking companies with solid economic and financial fundamentals remains. As we emerge from the pandemic, we will target the stocks on our approved stock list and continue our tradition of buying and holding, but staying alert.


Investment Counsel Inc., a Division of LaFleur & Godfrey, is a registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

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