Labor shortage

America’s post-pandemic employment picture is an unsettling paradox. On the one hand, job totals are finally back above pre-pandemic highs — and unemployment rates skirt fifty-year lows. But at the same time, overall work rates are lower than they have been since the 1980s — and millions of workers who dropped out of the labor force during the Covid-19 lockdowns have yet to return. A peacetime labor shortage has erupted, yet vast numbers of men and women are still sitting on the sidelines of the economy. America is renowned for its work ethic — and rightly so. The average worker in the United States clocks more hours each year than those in Canada, Australia, Western Europe and now even Japan. But those are the work patterns of US men and women holding down a job.

The most important macroeconomic development of the last three decades has been the extraordinary growth of the Chinese economy. In 1990, it was largely a subsistence peasant economy with a negligible footprint in world trade. China now provides the largest share of world exports, and by some standards has already become the world’s largest economy. In 1990, the wage of an average Chinese worker was perhaps 1/40th of that of an American worker. By 2020, it was just about a quarter: a tenfold gain in just 30 years. Before the 18th century, all societies were basically subsistence peasant agricultural societies with a small upper layer of landowning nobles and clerics. Then the Industrial Revolution began.