February 28, 2017
The NYT wants us to mourn the plight of business people in Denmark. As the headline tells readers, “Danish companies seek to hire, but everyone is working.” The article then gives the assessment of several business owners and managers, as well as the director of labor market policy at the Confederation of Danish Industry, that the country simply doesn’t have enough workers.
They all explain that they can’t find workers with the skills they need and that this is causing them to lose business, thereby curtailing growth. It even tells us why raising wages won’t work, recounting the experience of Peter Enevoldsen, a manager at a company that make precision tractor parts:
“He offered a salary bump of more than 2 percent, but raising wages further would crimp his margins.”
Actually, this is the way an economy is supposed to work. If Mr. Enevoldsen can’t pay the market wage and still get business, then he should not get that business. Firms that can pay the market wage and still make a profit obviously can use the labor more productively.
This is why most of the U.S. workforce is not still employed in agriculture. Workers had the opportunity to get better paying jobs in manufacturing. If farmers could not pay a comparable wage, then they lost workers and might have to shut down. This is the same sort of story that some Danish firms apparently now face. This is hardly a crisis, it is capitalism.
It also is of little significance that a limited supply of labor might limit growth. There is little reason for people to be concerned about aggregate growth, what they care about is improvements in their standard of living and for most people this will happen more quickly in a tight labor market.
The piece also includes the information that the current 4.3 percent unemployment rate “is about as low as it can go without provoking inflation.” It doesn’t tell readers where it got this information. It is worth noting that estimates of the non-accelerating inflation rate of unemployment (NAIRU) are hugely unreliable, so there is little reason to assume the source for this number is correct.
The piece also invents some new history to back up this story.
“During an economic boom a decade ago, joblessness fell as low as 2.4 percent, igniting an unsustainable spiral of higher wages and prices that the government desperately wants to avoid today.”
According to data from the International Monetary Fund, the inflation rate never got above 2.5 percent in the last decade. It seems a bit hard to describe this as an “unsustainable spiral of higher wages and prices.”
I suppose this piece is at least better than some of the NYT’s past coverage of Denmark. A few years ago it was warning that no one was working in Denmark because of its overly generous welfare state. An earlier piece warned that Denmark could slip into a Greece-like crisis. So, at least seems to be looking up a bit for the country.
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