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A Job Seekers' Market?

Week in Review
August 3, 2016 11:00 AM

man-1205084_960_720.jpgThere are often issues that we can consider as controversial or debatable.  Each week Dr. David Mielke presents one of these issues to give you Something to Think About. The topic for this week is  "A Job Seekers' Market?"  The State of Michigan is approaching a labor shortage, one that experts say will be getting worse.  The shortage right now is especially critical for entry level jobs.  There is evidence that the labor market overall is tightening and starting to push up entry level wages even as politicians are pressuring for higher minimum wages and some companies are raising pay scales.  Are the low unemployment rates reflective of the labor market overall?  Is there more a problem of under-employment with millions of people working part-time that prefer to work full-time?  Will companies have to raise wages?  Is the lack of entry level workers a matter of training or wages high enough to attract workers?  Can wages be raised enough to overcome the welfare benefits available with food stamps, rent assistance , free phones and other support that provide more money for not working than may be available in the job market?  Should companies increase the competition for existing workers?

David looks at some issues:

1. The Michigan unemployment rate is now 4.6%, the lowest in 10 years, while the unemployment rate in Detroit was 5.7% in May.  National unemployment, labor force participation rate, and other statistics are reviewed.

2. The metro Detroit labor force has risen slightly to more than 767,000 in May, from more than 750,000 in December 2015, but jobs are being created at a faster pace, causing the unemployment rate to drop.

3. JP Morgan Chase and Starbucks announced they would raise pay for their lowest paid employees. Other employers are offering new perks to hire people including signing bonuses.

4. Employers are not necessarily complaining about skills gaps, but rather just finding employees willing to be trained and do the job. 

5. The average adjusted salary for local workers with zero to 2 years of experience has risen more than 16.5% in 2015, but longer experienced worker’s raises are barely an uptick.

6. More than 47% of respondents to the EAA study said they have already increased starting salaries to attract workers and 80% said they planned to do so again this year.

7. Crain's reported in May 2015 that labor market pressures were already creating a cherry-picking environment among local companies for highly skilled workers. Some are losing employees to customers.

8. Michigan is not alone. The US is at risk to run out of therapist, mathematicians, rail workers and factory workers, among others, according to an April report by The Conference Board. Retiring Baby Boomers are seen as a primary cause.

The economy and Michigan's industry are cyclical.  Employers are forced to gamble on raising wages during a strong economy with the concern that the next recession could be right around the corner.  Although car sales may be close to another record this year, they are projected to be lower next year.  Should employers raise wages?  Should they instead offer a bonus system to reward and retain good workers rather than raise wages that cannot be lowered when and if the economy softens?  Is the shortage of entry level workers just a result of Baby Boomers retiring, or is the shortage part of a years-long problem of a lower worker participation rate?  Can wages be raised enough to pull more workers into the labor force?  Is this a multi-faceted issue?  Is part of the solution welfare reform which may increase the labor participation rate? Is part of the solution to encourage Baby Boomers to work longer, delaying early retirement to work to at least age 65? Is part of the solution to revise retirement benefits to start only at age 65--eliminating the payment of retirement benefits and then having people continue to work?  And is part of the solution to create incentives to have people work longer by eliminating the employee and employer social security deductions when a worker hits age 65?  Should we also consider an immigration reform to bring in more workers?

What do you think?  Something to think about.

That’s it---Something to Think About.  Thank you for listening.  This is Dave Mielke your host for the Week in Review for July 25, 2016 on the Michigan Business Network.

We want to know: “How can we provide more value to you to help you and your business succeed?”  Have a great week!

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Week in Review, hosted by Dr. David Mielke, covers the previous and coming week’s business stories and stock market news while discussing how these events will impact the business world – encouraging you to form opinions on this week’s topics.

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