Friday, October 8, 2021

Brits can't get gas, Americans can't get covid tests or paper towel. What's Up?

It seems odd to talk about problems associated with Covid since the worst of the problems seem gone to those in Western countries.

But the global supply chain. the one that makes both cheap clothes and imported vegetables normal, that supply is in stress. Serious stress. Almost all of this has been the result of normal capitalism decisions amid Covid, which may maximise profits, but screw up human life. What isn't caused by capitalism is caused by stupid ass policies, at least in the UK and the US.

(lots more after jump)

Correct Capitalism Decisions that Screwed Us.

When the pandemic first hit, business owners made the normal (and business wise  - correct) decision let go of many workers. Retailers and Wholesalers cancelled orders as commerce shut down. In turn, many Producers in China and Asia laid off workers. The problem was exacerbated (or mitigated) by Covid, which froze many production plants as well.

But it in't just clothes, toys and shoes where production collapsed. China, the United States and Taiwan are the major computer chip manufacturers. And the two biggest, China and the US, were massively impacted by Covid shutdowns. And computer chips go in most everything now. White goods (like refrigerators, microwaves, stoves, wasers, even fans with remote controls) depend on computer chips. Cars depend on computer chips. Even toy dogs that bark depend on computer ships now.

So the business wise correct decision to shut down plants made sense.

But.. But then direct payments were made to the US and European workers. Demand grew, but the production was still down. Some industries couldn't change output (toilet paper production in commercial sized rolls could not quickly change to home use sized). Some industries were choked by chip shortage. And many couldn't instantly restart as easily as they could instantly stop.

Slowly production in Asia ramped up. Now the producers, wholesalers and retailers were bouncing back. Only to be hit by a labor shortage. As you can see in the Port of LA / Long Beach - the busiest port in the world - the back up of goods from retailers is staggering. And, do to capitalistic decisions about economies of scale, there is only much more limited port capacity on the west coast. Portland, San Francisco, Seattle and Vancouver traffic has mainly moved to Los Angeles / Long Beach and their ports cannot rebuild slots in months or even years.

Traffic jam of cargo at LA / Long Beach

Workers and Covid

Another assumption, by US companies in general and stupid ass Republican governors in specific, was  that workers would come screaming back. In economic terms - assumptions were workers were a fungible input - that is any worker could do any other worker's job. Furthermore (economically speaking), producers, wholesalers and retailers didn't see any reason that worker desire versus pay scale should change.

In the US and European nations, MOST employers operated under old assumptions. Pay the same wage, and workers would come back at the same rate.

Which, it turns out, was not true. And entirely understandable. The world is not an "economic model", but a set of personal decisions and policy. 

BUT wages are not the only factor. Sure, it is a nice economic model for business, but the assumption is wrong. Wages are not people's only drivers. Covid safety considerations are large, particularly for people with children whom they didn't want exposed. Access to jobs is also a true consideration when buses, subways and trains reduce schedules or cut routes. Personally safety is a concern. The complete lack of child care in the US is also a reason.

To overcome these issues, wages need to rise to a new level in order to ensure that supply meets demand. When that doesn't happen, when companies don't want to pay more than minimum wage, workers don't come back. When wages increase, people come back - as many employers have seen.

However, higher wages mean less margins or higher prices, so many business are trying to wait it out. In the many southern states with Republican governors, the state actually turned down funds for their unemployed, on the assumption that poverty would drive people back to work. But it has not worked. Employment levels and growth are the same in states that kept unemployment payments high. Workers are no longer making decisions simply based on wages.

The media stories of the reasonably well off wanting more challenges or greater growth are all well and good. Those stories are reported because that is class of people which reporters meet and interact with daily. But the much bigger story is the people that don't come back because they can't afford to.

Stupid American and British Policies

There is one more very obvious reason that the supply chain is screwed in England and the United States. We made it much more difficult for non-locals to work.

In England, Brexit convinced many workers to go home. And many did, with the idea of returning to England after Covid ended. However, Covid meant these workers were stuck in their home countries and couldn't get into England, even when employers wanted them. England's borders were shut down, with EU workers outside.

England's huge problem right now is that "menial" jobs, (shop clerks, truck drivers, construction) were done by workers from lower wage EU countries like Poland, Romania and Croatia. Without them, low wages in those industries meant less employees, and almost no British citizens, as the companies tried to scale their work forces back up. England is now having the military step in and drive big rigs. It turns out many jobs are not fungible -that is you need special skills to do them, like drive a huge ass truck. As much as companies want to think workers are workers, teaching a hotel receptionist to drive a 12 wheel truck turns out to be difficult.

So England has a bottle neck not only in workers, but in training and certification.

A similar set of problems is unique to the United States.

In the United States, the "illegal alien" issue trumped business considerations. Without illegal workers, whose pay is pretty bad versus work required, food production plants, field workers and other low wage workers (janitors, maids, gas station attendants, etc.) those positions aren't filled. Alabama once tried to hire Americans to pick fruits and vegetables on large farms. hardly anyone showed up, even for $10 - $15 an hour. And of those that did show up, 25% didn't stay past lunch break and 70% didn't make a week.

Many legal workers went home (the US is a big ass country) during Covid. And moving back to large cities is often much less appealing than it once was. So there is now a shortage of workers for low paying city jobs like waiters, cooks, doormen and cleaners.

And then there is the labor shortage of skilled workers. As you can see from the back up at ports, other positions like truck drives, longshoremen and train operators, are also limited by the number of willing workers, training and certification.

How did this happen? And what happens next?

I would love to blame stupid American and British policies, and they do play a large part. 

But a much more reasonable (and therefore probable) explanation is that we had a worldwide pandemic on a scale we never had in the last 100 years. Lesson from a time of  pre-travel are of limited use in an era of planes, autos and world travel.

It was made worse by a global supply chain of both workers and goods. These spread the problems, not mitigated them. We had no plan to react. Even Obama's plan, which Trump threw out, would not have prepared us for such a worldwide problem.

What's next? Wages will probably have to go up. Right now political pressure in the United States hlds this back. Minimum wage increases and migration are both blocked either by corporate pressure on Congress or politics. 

Once the Republicans are in power, and can't blame migration on Democrats, the door to foreign workers will open. Maybe in a legal way, with work permits, but most probably in the illegal way, since employers can maintain control better. Corporate pressure for loser control of the border has worked before, and will work again. Think of all the illegal aliens working in slaughterhouses, picking fruits or domestic jobs before the pandemic, and how much money it would take for you to do that work.

In England, foreign worker migration has already been legalized. In America migration will be tolerated, even if not legalized.

This probably means inflation, at last for a few years until wages versus supply finds a new equilibrium in different sectors and countries. It probably enables right wing politicians to rail against foreigners while winking at the employers that use these  foreign employees.

But overall for a capitalistic society, not a lot will change. Another disruption in the global supply change will again cause harm, but make business sense. 

As a species, we are capable of  ignore lessons repeatedly. If a gazelle makes a mistake, it gets eaten. If a lion makes a mistake, it starves. If a politician makes a mistake, they get reelected. If we make a mistake, we usually get another chance. 

And so it goes.

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