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Dual Challenge: Combating The Shortage Of Labor Workers And Supply Chain Breakdown

AILSA CHANG, HOST:

In Pennsylvania, they are rationing booze.

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UNIDENTIFIED REPORTER #1: If you go to a state store, you may only be allowed to buy two bottles of your favorite alcohol.

CHANG: The State Liquor Board says with supplies running so short, they had to create purchase limits for individuals and businesses on certain brands.

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UNIDENTIFIED REPORTER #2: Forty-three products are on the list. It includes bourbons, Champagne, Hennessy and Patron.

CHANG: Purchase limits are also newly in place at Costco.

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UNIDENTIFIED REPORTER #3: No more stocking up on toilet paper, cleaning supplies and other items at Costco.

CHANG: And unlike the start of the pandemic, it's not because people are panic-buying.

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UNIDENTIFIED REPORTER #3: It's because of supply chain issues overseas.

CHANG: Many more companies are dealing with the same thing.

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UNIDENTIFIED REPORTER #4: Supply chain delays...

UNIDENTIFIED REPORTER #5: And product shortages...

UNIDENTIFIED REPORTER #6: For all types of goods.

CHANG: Nike is warning of delays through next year. Home Depot and IKEA are literally chartering their own shipping vessels to move product faster. And even though it's still September...

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UNIDENTIFIED REPORTER #7: Tis the season for holiday panic. Global supply chain delays are threatening to disrupt shipments...

CHANG: Retail experts on network TV are already saying stuff like this about the holiday shopping season.

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UNIDENTIFIED REPORTER #8: There isn't a lot of inventory, so if you - the longer you wait, the more of a premium you're going to pay on not just shipping, but also the price of those items.

CHANG: So yeah, shipping delays are one big part of the problem right now. Another is labor. Domestically, there have been shortages of truck drivers, warehouse workers and dockworkers. Internationally, COVID spikes have hobbled factories in places like Vietnam, Indonesia and Malaysia. This global shortage of labor is also not going away anytime soon. I spoke to an economist at the University of Michigan, Betsey Stevenson - she's a former member of President Obama's White House Council of Economic Advisers - about why this labor shortage is going to continue for a while.

All right, so Betsey Stevenson, before we even talk about how jobs and the supply chain are connected, can I just ask you, have you even started your holiday shopping? - because I sure haven't.

BETSEY STEVENSON: Oh, well, I actually have been pushing my children to give me their lists for what they might want. And I have...

CHANG: (Laughter).

STEVENSON: I have actually already bought a few things for the holidays.

CHANG: Wow, look at you. OK, so you're totally on top of it.

STEVENSON: I'm very worried. You know, my kids notoriously tell me on, like, December 15 what they want for the holidays, and then I'm, like, in a mad scramble. And I've told them this year that they will get donations to charity only.

(LAUGHTER)

STEVENSON: And I was like, and you will love them. They will be great donations to charity for you this year.

CHANG: (Laughter).

STEVENSON: But if you actually want a present for yourself, let me start thinking about what you want now.

CHANG: That is very impressive. But I just want to ask you, why are we even at this point? Like, you know, we all remember how hard it was to get Clorox wipes, masks, toilet paper at the beginning of the pandemic. But it's been more than 18 months. The supply chain is still out of whack. Why are we even talking about starting holiday shopping now in, what, September, as soon as pumpkin spice hits the shelves? What is going on with the supply chain?

STEVENSON: Well, you know, I love that you started with last year's problems because I think you want to think about there being three issues with the supply chain. One can be that we're changing what we consume. Last year, we all discovered a brand-new love of hand sanitizer and Clorox wipes, and they just couldn't keep up with that newfound demand that quickly.

CHANG: Yeah.

STEVENSON: But, you know, they've learned, and there's a lot of new companies making hand sanitizer. Same thing with masks. You know, we all discovered a brand-new love of masks, and they had to - companies had to change what they were producing in order to meet all these shifts in demand that occurred because our preferences have changed. In order to fight COVID, the way we're living our lives, what we want is different.

The second reason - it's what economists might call a bank run, right? You fear that everybody else is going to go ahead and take their money out of the bank. What we saw last year was a toilet paper run. You feared that everybody else was going to buy toilet paper and there'd be none left for you.

CHANG: So you would stock up.

STEVENSON: Yeah, your best response to your fear about what everybody else is going to do is going to be to go out there and buy toilet paper. So when you think that other people are stocking up, your best response is to stock up, even if you don't believe that there's any actual real problems out there. And so we see stores now that are like, hey, we've been burned by this before. And, you know, Costco's already got the one toilet paper per person please sign up. And that's just because they don't want these toilet paper runs, which kind of create artificial problems because they're really just about people panicking.

Now, the third thing - a lot of companies just can't run things the way they were being run prior to COVID. And it's important for us to realize that COVID's affecting the entire world. And most of what we want in life involves people doing something. So there are entire factories shut down because too many people in the factory have COVID for it to be able to operate. There are people getting sick and dying, and getting sick and dying is making it hard for them to produce the stuff they were producing before.

I think we get so focused on what COVID means for us and the United States that we forget that there are people all over the globe who are sick and dying right now. And because they're sick and dying, they're not making computer chips or they're not making cars or they're not making clothes.

CHANG: All right. So yes, deaths from COVID are certainly a factor. But this global shortage of labor - there are other factors that have contributed to that, right?

STEVENSON: One thing to think about with COVID and where are the workers - and I think countries around the world are struggling with this - is there's been also a reduction in movement of people. So we don't have immigrants coming in, doing some of the jobs that they used to do before. In our country, in other countries, we don't - we just don't have people traveling to where they might be able to make a great contribution. But it's not obviously just immigration. We're also seeing that job - the characteristics of jobs have changed. And those characteristics have maybe made the job more dangerous, less pleasant. That means people might not want to do that job anymore, or they might be demanding higher pay in order to do that job. And so we have a lot of reallocation going on in the labor market. So people want to hire, but people also want to change jobs. Quits are at an all-time high right now. People are quitting jobs.

CHANG: Yeah.

STEVENSON: And job openings are also at an all-time high.

CHANG: Yeah.

STEVENSON: The great thing about there being so many openings out there is that means there's lots of opportunities for you as a worker. So if your job got worse, if there's more of a risk that you get sick, if people are being ruder to you because you have to ask them to put on a mask in your store, well, you might just be looking for something else to do. And we're seeing a lot of workers changing industries. We're seeing a lot of them changing occupations. They're looking for better opportunities, and they're holding out for better wages. And they can afford to hold out for better wages because there are so many opportunities out there. But that holding on for what you want, that's creating a slowdown of workers being allocated to new jobs.

CHANG: Walk me through how this simultaneous lack of a continuing supply of workers and the disruption to the global supply chain, how those two things are connected.

STEVENSON: Well, one issue is that we don't need workers in some places right now because we're not getting the goods in from abroad. Workers themselves are part of the supply chain. And so they can be creating their own disruption. Maybe can't find enough workers to complete the job. But maybe you're a construction site and you've got the workers to lay the bricks, but you don't have the bricks. So you don't want to be hiring more workers because you can't even keep the ones that you have busy because you're not getting the supplies in. And that's going to slow down your desire to hire because even though you got plenty of people wanting you to build for them, you don't have the materials, so you don't actually need the workers.

At the same time, we have record job openings and record quits. So there's just a lot of turmoil in the labor market right now and turmoil in the product market. And I think that it's also the case that customers are changing what they want to buy, and they're still trying to figure some of that out.

CHANG: So let me ask you. There's a lot of churn in the job market, as we were talking about, as people are rethinking all of their options. Employers are dealing with instability because of COVID. What do you think? What is it going to take for people to get back to work?

STEVENSON: I think partially we don't know what the new normal is going to be. We do have to decide how it is that we want to live, and that may mean some people work less. That may mean some people retire earlier than they would have without the pandemic, and they're not going to unretire. But maybe the other people are just in the process of changing jobs. We're going to come out of this perhaps more productive with people in better jobs, with higher job satisfaction.

CHANG: Well, how long do you think it will take for all the things you just described to settle and for people to start working?

STEVENSON: Really, no one can answer the question of how long it's going to take because we don't know the path of COVID yet. But I think we'll have come to a place where we have ongoing economic growth, where our labor force participation rate has recovered and we have, you know, a lot - millions of more people in the labor force than we have today.

But there is another path. That's a path where we don't make a lot more progress with the vaccination rate. Because we don't make a lot more progress with the vaccination rate, a more deadly variant of COVID erupts. That causes us to have, you know, more slowdowns, if not shutdowns, but slowdowns. And we definitely saw the economy slow down with the delta variant. And if we continue to have those slowdowns, then I think we've - what we've learned is a pandemic that changes what we do for a year, for 18 months ultimately changes what we want. So not only can I not tell you what the path looks like, but I don't even know what the end point is if we're on a path with a new, more deadly variant of COVID on the horizon.

CHANG: I don't even want to imagine that darker path. Betsey Stevenson is a professor at the University of Michigan and former member of President Obama's White House Council of Economic Advisers.

Thank you very much for joining us today.

STEVENSON: It was a pleasure talking with you.

(SOUNDBITE OF AEROC'S "BLUE EYED BITTER") Transcript provided by NPR, Copyright NPR.