The labor force in Augusta is below 267,000 (March 2022) compared to almost 271,000 pre-pandemic. Traditional thinking and economics suggest that employers should raise wages and that will increase the workers’ opportunity cost of staying at home and at least some workers will be enticed back into the labor force.
Unfortunately, as I mentioned last week, average weekly earnings in Augusta have not kept up with increases at the state and national levels, and even declined in 2021. Nationally, earnings have increased by 5 percent in the same period. But even increases of 5 percent do not cover inflation and the national labor force is also still below pre-pandemic levels.
A new study from Julie Hotchkiss of the Federal Reserve Bank of Atlanta sheds some light on the lack of response to wages (you can read the report here.)
Millennials and Generation Xers are less responsive to wage increases than Baby Boomers were at their age. Baby Boomers would increase their probability of being in the labor force by 0.04 percentage points if wages increase by 1 percent. Gen Xers are about half of that, and Millennials are about three-quarters.
Hotchkiss provides some suggestions for the lack of response to higher wages from Millennials. Citing prior research, Hotchkiss says 35 percent of Millennials would take a pay cut to work for a socially responsible firm and 80 percent say they want to work for a firm with a conscience. Hotchkiss concludes that firms struggling for workers may need to consider non-wage incentives to recruit new employees. (For more insights on recruiting and retaining employees, read Rick Franza’s advice here.)
Maybe in response to changing hiring strategies, since the beginning of 2022, those aged 25-54 (roughly Millennials and Gen Xers) have increased their participation in the national workforce by about 1.5 million. The local labor force statistics are not broken down by age, so it is hard to say if a similar trend has been seen in Augusta.
