The Labor Shortage is the Catalyst for Sustained Inflation

The pandemic may be transitory, but the inflation is here to stay

The term labor-shortage has become quite popular in our vernacular, making headlines almost daily. Its effects are extremely visible in the American economy, and this shortage is now impacting all industries, whether directly or indirectly. Like in a natural ecosystem, the smallest participants play a critical role in supporting the entire food chain. As it relates to the economy, the lowest-paying jobs are also the most essential, and without workers to fill those roles the entire market comes crashing down like a house of cards. I believe it is about time workers are rewarded for playing such a quintessential role in our economy, but most of these wage hikes are too little, too late, after decades of stagnation.

When addressing the underlying cause for this crisis, however, people are quick to assign their personal assumptions of the cause while failing to acknowledge the several other contributing factors. Blame seems to most frequently be placed upon the high unemployment benefits and pandemic stimulus checks distributed to millions of Americans over the past two years. While this is certainly a notable contributing factor, there are larger forces at play which have been setting the stage for years. Follow along as I dissect the reasons behind the so-called ‘labor shortage’, and why I believe this frothing pot will finally boil over, resulting in sustained inflation in the USA.

De-Globalization

Although globalization was increasing rapidly throughout the beginning of the 21st century, it reached its peak in early 2020. For reasons beyond anybody’s control the borders of the world were shut on a moment’s notice, instantly turning globalized countries into isolationists. As economies were closed to combat the spread of COVID-19, industry faltered and manufacturing slowed to a halt in many sectors. Although this is the most obvious factor in the de-globalization trend, it is not the only reason I believe globalization reached its peak.