2022 is the year of the tiger in the Chinese zodiac. People born in the year of the tiger are thought to be competitive, self-confident, and brave. They like to do things alone. The tiger represents willpower, courage, and personal strength.
All of which aptly describes a lot of workers going into the next year. Even as the pandemic grinds on and Covid cases rise yet again, labor markets have rebounded, defying predictions of high unemployment. In October, unemployment dropped to 4.6% as the economy added over a half-million new jobs. On current trends, the labor market should strengthen even more in the coming year, and workers will have more bargaining power than they had for decades. Driving this outcome are three forces.
1. Desire for a Better Life
Despite surging wages, labor force participation remains low among those of prime working age (25 to 54). But the increases may not be enough to compensate for the deterioration in quality in many jobs because of health risks and unpleasant working conditions that involve threats like dealing with unruly customers.
As a consequence, about 1.4 million fewer adults in this category are working or looking for a job than in February 2020, the month before the pandemic started. The labor-force participation rate for these workers was 81.7% this October, down from 82.9% in February 2020.
Factors such as ending expanded unemployment benefits that were expected to speed up the return of workers in this category to the labor force don’t appear to be having much of an impact. Surveys suggest that many people have chosen to do what they had long thought about — starting a business or deciding that the benefits of a two-income household no longer outweigh the costs.
Additionally, younger workers now place a premium on getting respect. A survey of workers younger than 35 found that they value having respectful communication in the workplace over trendy work perks. They want their managers to nurture them and give them flexibility and autonomy.
2. Lack of Automation
AI and automation were supposed to displace jobs in large numbers. Futurists and academics have been predicting mass unemployment for over a decade. But there’s little evidence that this is happening. Jobs that are considered vulnerable to automation are growing just as quickly as others. Despite massive investments in robotics and AI, worker productivity — which is how we measure the extent to which workers are being replaced by machines — has slowed dramatically. This is especially the case in manufacturing, which has seen the biggest increases in automation.
3. Economic Policy
The government’s response to the pandemic has been to do whatever it takes to bring about full employment. This has mainly taken the form of pumping unprecedented amounts of money into the economy in the hope that unemployment will drop. That the recession ended in April 2020 hasn’t been a reason for the gusher of money to be shut off, paid out through multiple rounds of stimulus payments including the $1.9 trillion American Rescue Plan, $1 trillion infrastructure bill, and potentially another $2 trillion for social spending and mitigating climate change.
These three factors collectively have given workers the upper hand in bargaining with employers. An example of this is the labor contract agreed to by agricultural equipment maker John Deere. It includes an $8,500 restart bonus, an immediate 10% raise, two 5% raises and two large bonuses through 2026, plus an agreement to adjust wages each quarter based on inflation.
The contract at John Deere shows that many workers are demanding not just better pay, but a more secure future that insulates them against missteps by the government. This is best exemplified by the cost-of-living adjustments. The massive amounts of money pumped into the economy have pushed inflation to a 30-year high, and workers are demanding employers adjust wages to compensate.
Demanding respect, a more secure future, and better conditions takes bravado and courage and the willpower to stand up for what one believes in. It will indeed be the year of the tiger.