Employers continue to report difficulty finding workers. In a competitive labor market, we would expect persistent shortages to put upward pressure on wages. Yet the September jobs report, released Oct. 2, showed hourly earnings rising just 0.1% for the month. The disconnect raises an important question: What if part of the labor shortage does not reflect a lack of workers willing to advance, but economic incentives that make advancement financially risky?
In our work with low-income families, employers, and workforce development programs, we have seen a recurring pattern. Workers turn down additional hours, raises, and promotions even when they want to earn more. From an employer's perspective, these decisions can seem irrational. But when we examine the household economics, they often make perfect sense.
