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Why are US firms having such a hard time hiring? πŸ”—
1635261979  

The mainstream narrative throughout the last couple years has been that additional aid to the unemployed was encouraging them to be layabouts. Now that this aid has ceased, people are looking around and realizing the problem lies somewhere else. It turns out that the reality is a combination of both being on the cusp of a demographic cliff and workers fed up with common behaviors of employers in a glutted market.

One such behavior has direct relevance to hiring. Thanks to said oversupply of labor for years, a similar situation to that experienced by women on dating apps has developed. Which is to say a spam crisis. This has resulted in incredibly aggressive filtering measures. Most commonly these are automated filtering, inflated JDs (job descriptions) and deceptive offers. For a while this was working, but lately the successful match rate (Belveridge curve) has nosedived. I suspect I know why.

Automated Filtering and JD inflation

JD inflation started out the same way most product requirements go. Too many cooks adding too many ingredients. What started out as a light scout vehicle becomes the Bradley fighting vehicle.

Eventually programmers got a hold of these documents and realized they could apply search techniques to try and improve match rates. This provided great results for both employers and workers for the first decade of the 21st century. However, like the web it became filled with spam and SEO'd content and the signal-to-noise ratio plummeted.

The practical consequences of this are twofold:

The latter is particularly concerning as recruiters are quite expensive per hire. This means that the only cost-effective way small firms can acquire talent is via personal connections. The former is also corrosive, as many on both sides have come to accept that you have to cynically game this system to get good results.

Deceptive Offers, Liar Hires

Recently a story went viral about the abysmal rate of responses a qualified applicant got for entry level jobs, and how the offer was always lower than advertised on those that did respond. It should shock nobody that marginal firms engage in catfishing to game this system and get better hires than they could normally. So long as advantage may be acquired through dishonest practices people will try it absent any meaningful sanction. All's fair in love and war and hiring.

Similarly many prospective hires get good results using jedi mind tricks pioneered by salesmen and pickup artists to rapidly build emotional investment in their counterparts. This causes a great deal of resentment in those who prefer devoting their limited time to professional excellence when they see this results in the (relatively) unskilled getting ahead and them being left behind.

Much of what we are seeing with our worker shortage is these resentments finally boiling over. Professionals either decide to "play the game" or take their ball and go home. This results in turnover at worst and checked-out disloyal workers at best.

Firms have tried to prevent this by fostering a cult atmosphere via paternalist measures and propaganda. This is both expensive and ineffective outside of the short-term. Competitors have all adopted similar benefits and anyone paying attention is wise to the BS now. Joshua Fluke has made a career on youtube pillorying this nonsense. The only option left to employers is actually raising wages.

That said the astonishing levels of average household debt continues to weaken workers' position. They ultimately don't have enough savings to give an outright no. The American worker's only choice is who to say yes to. Woe unto those working in highly consolidated industries, where competition is less meaningful of a bargaining chip.

Demographics

What is making this even worse are demographic trends. The boomers are taking these frustrations they've been dealing with for years and being at or close to retirement age as sufficient reason to throw in the towel. Similarly many spouses are discovering they prefer being at home in a supporting role after having experienced it thanks to pandemic related layoffs. Anxiety over family formation (the lack thereof) likely factors into this decision to an extent.

Like the mainstream narrative as to why the shortage was incorrect, the advocated solution to the demographic problem is also incorrect. While increased immigration will provide a fresh supply of those ignorant of the reasons Americans are reticent in dealing with US firms, this is not a sustainable solution. The internet has massively increased the speed with which immigrants are stripped of their illusions regarding the "American Dream". Many immigrants deeply resent the sword of Damocles that green cards represent and they inevitably learn the reality of the American workplace as well.

Nevertheless, supposing an unlimited supply of skilled labor willing to immigrate (which upon reflection is actually quite a dubious assumption) the can could be kicked down the road indefinitely. However there has been no meaningful increase in immigration at present, which means employers must take concrete action now or accept understaffing. This means any change in immigration policy is unlikely to happen, as it will be "too little, too late" for the vast majority of firms.

Expansion of Entrepreneurship

One other way in which people are "taking their ball and going home" is striking out on their own, much as I have. The 49% increase in EIN applications is strong evidence many are doing so. I have been surprised for years that more didn't recognize the strength of contracting earlier. The tax advantages are quite strong and automation removes much of the need for support staff. Nevertheless now that people are taking the plunge, this is removing a significant number of people from the employment rolls permanently.

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