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Tuesday, April 27, 2021

“Unemployed workers have no incentive to return to work given the COVID bonus payments.”

Welcome to Grub Hub Nation. Through its various covid relief plans, the federal government is giving people a choice between staying home and getting a job. People are choosing the former. This greatly pleases Chairman Xi, because this further wrecks manufacturing in the United States.

The Federal Reserve Board of Kansas City explained this.

The Fed in KC said, "Tenth District [Kansas City and the Great Plains] manufacturing activity expanded further with the highest monthly composite reading in survey history, and expectations for future activity increased considerably. The index of prices paid for raw materials compared to a month ago also reached the highest level in survey history. In addition, finished goods prices expanded more from a month ago and a year ago. Materials price expectations for district firms over the next six months continued to rise, and many firms also expect higher finished goods prices."

Everything is up to date in Kansas City except -- well, manufacturers have a tough time finding people to work.

The Fed surveyed manufacturers. It said, "60% of firms indicated the lack of qualified workers and supply chain issues are two of the biggest risks. Additionally, 28% of firms recorded the inability to pass through price increases as a primary risk, and 23% of firms noted the low demand for products/services as a risk to business plans over the next year."

The biggest problem is getting people to work.

Tax-producing companies cannot get workers because Uncle Sam is using those tax dollars to get people to stay home.

The Fed selected 11 quotes from manufacturers to describe the problem.

“It is very difficult to handle the increased business with supply chain issues across all materials and finding anyone who wants to work. The federal government has incentivized people to stay home and not be productive.”

“Stimulus and increased unemployment money are wrecking the labor pool. Lower level employees are quitting to make just as much not working.”

“Unemployed workers have no incentive to return to work given the COVID bonus payments.”

“Entry level pay will need to be increased. This will create pressure on all other positions.”

“We believe the shortage of workers is not an impact from the 2nd stimulus as much as a systematic problem of the gig economy and simply not enough workers for unskilled and critical skill positions. We are focused on retention.”

“We are facing significant supply chain problems due to COVID-19 issues, tariff issues, and the weather problems in Texas earlier his year.”

“Steel market needs to become stable. Steel producers recording record profits, while downstream suffers margin erosion.”

“Largest raw material provider is refusing to deliver previously accepted purchased orders at accepted prices - demanding 18% price increase to fill previously accepted orders of flat rolled USA stainless steel.”

“We could greatly grow our business if it were not for steel and labor issues. We could get more orders and employ more people. Supply chains are a mess and we cannot get people to apply. We pay upwards of $20 or more per hour with full benefits.”

“Liquidity is the BIGGEST issue. Ramp up of production is stressing cash more than usual since we depleted cash during the downturn more than what would have been typical.”

“The labor shortage is driving up the price of most proteins in food manufacturing.”

I included all the comments because I do not wish to portray the problem as one dimensional. Manufacturers have many problems. They always do. But federal policy has exacerbated this problem.

As a retiree, I see the allure of the Grub Hub life where you never have to leave your TV or video game to eat.

But there is just one hitch.

What happens when no one wants to work at Grub Hub, bub?

18 comments:

  1. Speaking with a CPA I know, he does his nephew's tax returns. 2019 - nephew earned $14K at his part time job. 2020, he earned $7K in wages and $21K in unemployment. So he doubled his income by not working!

    ReplyDelete
  2. An old Yiddish proverb says, "A worm in a jar of horseradish thinks its life is the sweetest in the world." Politicians and bureaucrats, by definition, are government lifers and don't give a rat's ass about the private sector as long as they get theirs. President Trump, having been a private sector businessman, understood these realities and tried to build up the economy. His big mistake last year was in thinking that Washington's medical establishment would behave like doctors instead of timeservers.

    ReplyDelete
  3. Those federal benefits (i.e. extended unemployment and extra $300/week) end Sept. 4, 2021. I suspect a LOT of people will be looking for a job at that time.

    ReplyDelete
    Replies
    1. They will end in September only if they’re not extended, as they have been several times already. I think federal benefits will be extended over and over until the next Republican administration, so Dems can blame Republicans for the loss of benefits.

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    2. I believe they won't be extended any more. Most realize that this astronomical spending has outlived its usefulness. Furthermore, when everybody does go back to work, Biden will take credit for it as alleged "jobs created."

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    3. Democrats already rallying to eliminate expiration of unemployment benefits, so recipients can technically collect unemployment for evah! 🤷‍♀️

      Delete
  4. I believe this is intentional. The intent is to force a raise of the minimum wage to $15/hour, either by law or de facto, because if you’re getting less than $15/hour, it’s more profitable for your employees to sit home.

    This is a losing strategy in the long run, because a doubling of labor costs will eventually be reflected in the cost of locally made products and services. So if a Wendy burger costs $7.50, and the minimum wage is $7.50/hour, you can buy one Wendy burger for an hour’s work. When the minimum wage goes up to $15/hour, it will soon cost $15 for a Wendy burger.

    The only people this helps is those NOT subject to the minimum wage — primarily China. So while everyone is forced to pay ridiculous prices for American-made products, lower-priced Chinese goods become more desirable. Economics 101.

    ReplyDelete
    Replies
    1. If you had actually taken Econ 101, you'd realize minimum wages are an impediment to full employment, and eliminate jobs for teenagers and retirees. You know what a $15 minimum wage looks like? Those self service kiosks at McDonalds.

      Delete
  5. the Dem plan is working, destroy America by destroying America s businesses

    ReplyDelete
  6. I know someone that needs 21 people for their restaurant. No one wants to work. The benefits are too good. Some that interview fail on purpose to show they tried to get a job.

    ReplyDelete
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