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Illustration: Aïda Amer/Axios

If companies raised pay high enough, then maybe they wouldn’t complain about labor shortages that have forced them to forgo sales. But there seems to be a limit to how much a company is willing to pay, despite what seems like a clear opportunity to maximize the top line.

Why it matters: Companies have been scrambling to staff up amid a rapid economic recovery. Employers across industries have been raising wages in their efforts to be competitive.

What they’re saying: Increasing wages is essentially a wager that today’s demand will persist and justify higher labor costs in the years to come. And companies don’t want to be in a position to have to reverse that decision.

  • "Companies are hesitant to lower wages," ADP chief economist Nela Richardson explains to Axios. "What generally happens is that companies don’t decrease pay during a recession, but they are hesitant to increase pay after that recession ends."
  • Much of the labor shortages are occurring in industries where profit margins are already thin, Richardson notes. These include the leisure and hospitality industry, where the risk of profits turning into losses is already high.

And employers can't offer higher pay to just the new people.

  • "Especially in thin margin businesses, if you pay to attract newer workers, you also have to pay to keep and retain your tenured staff," Richardson says.

Zoom out: There's a wide array of logistical reasons a company may have job openings that it's putting off filling, Wells Fargo economist Shannon Seery tells Axios.

  • "Perhaps severe supply constraints of inputs mean firms may not be paying more aggressively to recruit because they lack the inputs to produce even if they had the labor," Seery says.

The bottom line: While there appears to be a disconnect between companies complaining about labor shortages and what they’re doing about pay, the bias in the labor market continues to favor workers and their wages.

  • "Wages are on the rise across a number of industries, making the hiring environment all the more competitive and leaving job seekers with the upper hand to be ‘picky’ in terms of job prospects," Seery says. "Firms will either pay up for inputs and labor today or their competitors will."

Go deeper

Ina Fried, author of Login
Sep 13, 2021 - Technology

Google may have underpaid contractors for years

Illustration: Lazaro Gamio/Axios

Google realized late last year that it may have been underpaying thousands of temporary workers around the world, but opted to initially change its pay structure only for newly hired temps, according to a pair of reports.

Why it matters: The revelation comes amid growing workplace activism at Google, including the formation of a minority union that advocates for temporary and contract workers along with full-time employees.

GOP Rep. Gonzalez retires in face of Trump-backed primary

Ohio Rep. Anthony Gonzalez (R) Photographer: Stefani Reynolds/Bloomberg via Getty Images

Ohio Rep. Anthony Gonzalez (R) announced his retirement on Thursday, declining to run against a Trump-backed primary challenger in 2022.

Why it matters: Gonzalez has suffered politically since siding with House Democrats to impeach the 45th president after the Capitol riot.

Swing voters oppose Texas abortion law

Protesters at a rally at the Texas State Capitol. Photo: Jordan Vonderhaar/Getty Images

All 10 swing voters in Axios’ latest focus groups — including those who described themselves as "pro-life" — said they oppose Texas' new anti-abortion law.

Why it matters: If their responses reflect larger patterns in U.S. society, this could hurt Republicans with women and independents in next year's midterm elections. The swing voters cited overreach, invasion of privacy and concerns about frivolous lawsuits jamming up the courts.