Why the Recent Beveridge Curve Shouldn’t Drive Employers to Drink


The Fiscal Times reports that Americans are about to get a nice fat pay raise.  Yes, according to the latest data, the American job market has experienced the best run of job gains since 1997 and government statistics show the highest level of job openings since 2001.  This indicates (according to simple laws of supply and demand) that wages for American workers will be increasing.  Economists use a calculation known as the Beveridge Curve to measure how efficiently applicants are matched to job openings.  The current read of the Beveridge Curve suggests an imminent spike in wages for workers in a broadly improving US economy.  Here’s why the likelihood of higher labor costs as foretold by the Beveridge Curve shouldn’t drive business leadership to reach for an adult beverage.


Hiring managers confirm they’re having a tough time finding qualified applicants in numerous areas.  Business surveys like the NFIB survey suggest employers are preparing to pay more to keep their good talent and attract new talent too.  With the labor market having been depressed following the financial calamity of 2008-9, many workforce management programs grew accustomed to operating in a “buyer’s market” so to speak.  The high supply of qualified workers helped to keep prevailing wages lower and organizations had a surplus of qualified applicants to choose from. Profitability was furthered by leveraging contract workers in non-core roles.

The prospect of paying more for talent may have some organizations concerned.  But, here’s why any anxiety over the changing dynamics of the labor market are wasted energy.

First, consider that the extended period of economic weakness truly required the focus on contingent workforce strategies as a preservation tactic.  Many companies turned to contract workers to get through the lean times. In the process, these organizations developed the robust workforce management and optimization strategies that will serve them well in good times and bad.  Moreover, they’re now prepared for the next downturn (with best practices for compliance and many other solid business rules) which may be just around the corner.  Weakness in China, unrest in EU as Greece tests the bounds of the union there, and a number of other concerns all present threats to economic stability.

However, even if the US economy continues to chug happily and healthily along, organizations shouldn’t fret. After all, the significant increase in business volume that occurs when consumer confidence and spending are high (which occurs when people earn more) will more than offset the modest percentage increase in labor costs organizations will have to absorb.  “I would happily forgo increased business volume in exchange for keeping my operating expenses fixed”, said no business owner ever.

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