4 Factors Weighing On Labor Markets—And Implications For Fed Policy (Part 2 of 5)
To complicate matters, the labor market is struggling with some serious long-term issues that can’t be easily helped by conventional or unconventional monetary policy fixes. I would point to four factors:
1. Transition to Temporary Hiring:
For many businesses today, hiring full-time workers (with the added benefits costs they bring) is simply too expensive. Indeed, for some time the growth in benefit costs has outstripped that of wages and salaries, so it is not surprising that we have seen an increased use of temporary workers throughout the recovery.
Market Realist – Temporary employment is a major structural issue
The graph above shows the number of temporary workers in the U.S. (SPY) since 1990. The number of temporary workers was stable in the 2000s at around 2 million. However, after 2010, the number has steadily increased, and now stands at above 3 million.
Health care (XLV) benefits, along with wages and salaries, are becoming increasingly costly to provide for. Hence, employers may resist to form long term relationships with employees. This has, in part, helped cause the employers to hire their employees as temporary workers instead of permanent ones.
Temporary employment can be seen in other developed markets (EFA)(VEA) as well. In fact, the percentage of temporary employment in Europe (EZU) has reached 40%.
Mostly, it is fresh graduates who are taking up temporary jobs. This is so because, post the financial crisis, jobs have been hard to come by for Freshers. Since long periods of unemployment hurt chances of getting employed even more, many of these graduates have taken up temporary jobs.
Also, since older workers are refusing to retire, in order to provide for their retirement, in the light of increasing expenses, there are fewer jobs for those just entering the labor force.
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