Automation and today’s labor market challenges


Michael HIcks

Today, many businesses struggle to hire the workers they need. Whatever the causes, this current challenge will surely prompt widespread changes by employers. This type of adjustment isn’t a new phenomenon, but economists allocate very little time explaining the mechanics of change. Nor do we explain that these types of corrections are normal and generally, if not always, make society better off. This is true across many types of labor market changes. But, even as the world improves, there are some winners and losers, or rather each of us experience some benefits and costs. That too is worth explaining, along with some examples.

When businesses cannot hire enough workers at the wage they think is appropriate, they call it a labor shortage. Of course, workers get a voice in work as well, and a business thinking a wage is fair doesn’t matter if a worker doesn’t agree. This process of workers matching with employers is messy and slow, and government cannot do much about it. We try of course, and states are all funded by the federal government to create an online help-wanted database. It’s even possible that in a few years, with a few million dollars more, some states will have just as good a system as had back in 2004.

More from Michael Hicks:What’s happening in labor markets

The big challenge in matching workers isn’t information about job availability, but rather information about job quality and wages. High worker turnover is a sign of mismatched information about job and worker. In times when there is more demand for than supply of workers, wages should rise. This increases the relative cost of workers and makes automation more cost effective.


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