Microsoft explains why despite economic uncertainty it has to raise wages

The United States is facing the most delicate economic moment since the 2008 recession, once the pandemic is over, but against the backdrop of the war in Ukraine and with runaway inflation. In addition to the economic uncertainties, the directors of large technology companies warn of another added problem: the low growth of the population willing to work. And this has been warned by directors of Microsoft and Tesla, who see in this brake one of the greatest risks in the history of the country.

According to Reuters data, the increase in the US working-age population of about 5 million people recorded every five years since 1950 has changed. Already in the period between 2016 and 2020, the growth was reduced to 2 million. Now, after the pandemic, the trend is accentuated. Since Covid, millions of Americans unhappy with their jobs or their pay have quit, a move that has come to be known as the Great Resignation.

In this way, American companies face a “new era” in which there are fewer and fewer people entering the labor market and the pressure to raise wages may become “permanent,” said the president of Microsoft, Brad Smith, in an interview with Reuters.

Microsoft has not been the only big technology company that has warned about the economic slowdown that is threatening the United States. Mark Zuckerberg, CEO of Meta, owner of the Facebook social network, recently declared that the United States could face “one of the worst recessions we have seen in recent history.” Google has also indicated that it will slow down the pace of hiring for the rest of the year, given the uncertain outlook for the economy.

The problem of the lack of workers also aggravates these expectations. For Brad Smith of Microsoft, the shortage of new labor in the labor market “partly explains why you can have low growth and a shortage of labor at the same time. There just aren’t as many people entering the job market.”

Needing to find skilled workers in a tight market, Microsoft has raised wages while slowing hiring and even cutting jobs in certain areas of the company.

The labor market while it continues to show positive data. The US Department of Labor noted that employers continued to raise wages in June, forced by high inflation, and hired more workers than expected. Expectations of more interest rate hikes, however, predict a slowdown in the fall. On the other hand, the activity rate, at 62.2%, is still lower than the pre-pandemic level of 63.4%.

The issue of labor shortages has already been raised by Elon Musk, the controversial CEO of Tesla, who recently made an offer for Twitter that he later withdrew. Musk declared late last year that one of the greatest risks to civilization “is the low birth rate and the rapidly declining birth rate.” Musk has nine children.

Smith notes that he agrees with Musk “on the problem” but that in no case “am I recommending the same solution.”

Companies seek to attract IT workers

• Manzana. After warnings from Meta and Google about the economic outlook, Apple has emerged as a new big tech that will slow down hiring in the face of uncertainty, as reported by Bloomberg. None of the big companies, except Microsoft, considers layoffs. At least, for the moment, and not in a generalized way, but cost control is on the table, which involves reducing the expansion of the templates.

• YOU. The US economy added 25,000 information technology jobs in June, putting that category 105,000 more employees than just before the pandemic, according to Labor Department data. Salaries in this sector have also grown, given the lack of qualified employees.

• Biden. The president of the United States gave in June 2021, before the war broke out in Ukraine, advice to employers to attract and retain their best workers: “Pay more.” But those statements, which caused a business shock, occurred at another economic time: energy was not putting pressure on prices, and inflation was not yet at the levels it has recently reached (9.1% in June in the US).