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Unemployment benefits do not create a labor shortage

As the US economy rebounds from the COVID-induced slowdown, some employers say they are struggling to find workers. GOP lawmakers like Representative David Rouzer (NC) blame the safety net.

“This is what happens when you extend unemployment benefits too long and add a stimulus payment of $ 1,400,” Rouzer said on Twitter last week, posting a photo of a Hardee’s who said he was closed due to lack of staff. “Just when employers need workers to fully open up, there are few of them.”

It is a questionable argument. Republicans said the same thing last year when Congress passed a major relief bill that added $ 600 a week to state unemployment benefits for four months.

Democrats “are going to make the next four months impossible for small businesses to hire,” said Senator Lindsey Graham (RS.C.).

“This bill creates an incentive for people to be unemployed for the next four months,” said Sen. Rick Scott (R-Fla.).

Senator Ben Sasse (R-Neb.) Said the benefits “would hit this nation even harder in the months to come by unintentionally increasing unemployment.”

Back then, millions of workers were losing their jobs every week and no one knew how bad things were going to turn out. But weeks after the first lockdowns, companies began recalling workers, millions returned to their jobs despite the added benefits, and the unemployment rate plummeted. A wave of academic studies found the additional benefits did not prevent people from returning to work after all.

At $ 300 a week, the federal supplement is half of what it was last year, but criticism is twice as intense even though the doomsday has failed.

“People are paid more for not working than for working,” Senator Bill Cassidy (R-La.) Told HuffPost, referring to additional federal benefits. “Economists talk about it, but anecdotally, it’s clear.”

It is true that benefits are higher than previous wages for some workers. It’s just that the extra money does not seem to have retained the workers.

The unemployment complaint fits a broader Republican argument that Democrats under President Joe Biden want to destroy America’s work ethic with their proposals for new parental benefits and affordable child care.

“Think what the Democrats did,” Republican House Leader Kevin McCarthy (R-Calif.) Rep. tweeted over the weekend. “They demonized work to make Americans dependent on the big government.”

While some employers may be struggling to hire for one reason or another right now, economists say generous unemployment benefits aren’t the cause.

If the demand for workers exceeded the supply, the price of labor would skyrocket. But as Federal Reserve Chairman Jerome Powell said last week, overall wage growth did not increase. “We are not seeing wages increase yet, and we will likely see it in a really tight job market,” Powell said at a press conference. “And we might just start to see that.”

For now, unemployment remains high at 6%, down from 3.5% before the pandemic, and there were 4 million more unemployed in March 2021 than in February 2020. These data reflect people trying to find a job, not those who have withdrawn from the labor market for a number of reasons, such as lack of child care facilities. Yet some business owners still say there are no willing workers out there.

Chef Andrew Gruel, owner of the Slapfish restaurant franchise, took to Twitter last week to say: “there are no employees available in California. Gruel said his restaurants offered $ 21 an hour but couldn’t find a taker. The main reason? “They earn enough from unemployment and prefer not to work.”

William Spriggs doesn’t buy that. According to the chief economist of the AFL-CIO labor federation, Spriggs, it stands to reason that millions of people are trying to find work. Just because an employer hasn’t found them yet – at the wages they’re willing to pay – doesn’t mean the workers aren’t there.

Spriggs said the normal recruiting networks that employers rely on have been destroyed by the pandemic. Some employers who received government loans with forgiveness were able to keep their employees on the payroll, but many companies simply let them go during the lockdown. A year later, many of these workers took other jobs, moved or even dead.

“They tend to recruit using networks – friends and relatives of people they already hire,” Spriggs said. “And the problem, when we decided to deal with this by separating people from their employers, was that we severed those networks.”

Workers understand that unemployment benefits don’t last forever, Spriggs noted. Federal benefits will expire in the fall.

He also said employers might be reluctant to pay the “market clearing wage” – the wage needed to attract workers to all available jobs, especially at a time when many jobs have become more difficult and stressful. due to the pandemic. “Then they’re shocked when they try to expand and find out, ‘I have to increase my salary,’” Spriggs said.

(HuffPost tried to ask Restaurant Hardee in Rouzer’s tweet how much it had raised its starting salary to attract new workers, but no one answered the phone.)

Powell, for his part, acknowledged that some employers may have difficulty finding people who want to work for them. He said workers might be wary of exposure to the virus or face other obstacles in returning to work. In other words, there is always a scourge.

“An important factor would be that the schools are not yet open, so there are people who are at home looking after their children who would like to return to the labor market, but who cannot yet be. “, did he declare.

In the aftermath of the Great Recession, many employers lamented that they couldn’t find workers even in high unemployment, prompting some commentators to proclaim a skills shortage among American workers. (The federal government was not increasing the weekly wages of the unemployed at the time.)

“But what we’ve seen is that the labor supply has generally manifested itself,” Powell recalls. “In other words, if you were worried about running out of manpower, it looks like we never did, you know?”

The strongest complaints of a labor shortage now appear to come from restaurants, as more people are resuming their pre-pandemic restaurant dining habits thanks to widespread immunization.

The National Restaurant Association, an industry lobby group, says a variety of factors, not just benefits, contribute to hiring difficulties. “With fewer people in the workforce, the stimulus still in place, worker safety concerns, the need for caregivers to stay at home and much greater competition with other industries for workers. , operators are reverting to pre-pandemic recruiting techniques for hiring, ”the association’s Hudson Riehle said in a statement.

Wages may have risen a little faster than average this year in the hospitality industry, government says employment cost index, although state minimum wage laws may have played a role. In general, restaurant work does not pay much, with median salary around $ 11 for servers in 2020, compared to over $ 20 for all occupations.

Many restaurant jobs are also very different from what they used to be, with more outdoor seating, for example, masks and new cleaning protocols. Not to mention the new risks of getting sick. Some restaurant workers recently told Eater they were ready to go – they just want to pay for that reflects the dangers.

It is difficult to reconcile the notion of a shortage of foodservice workers with the strong growth in employment in this sector, said Heidi Shierholz, former chief economist in the Department of Labor now at the Institute for Economic Policy. Addition of food and beverage establishments 176,000 jobs in March, the largest gain of any sector.

“I’m sure the labor supply is lower than it would be if we didn’t have COVID, but that doesn’t mean there is a labor shortage” , said Shierholz.

Cary Christiansen, of Topsfield, Mass., Worked as a college softball coach before the pandemic. She said the work has not yet returned, but the summer league will start in June; she has also applied for another job as a dispatcher and is awaiting a response.

In the meantime, Christiansen, 55, said she and her husband were able to pay off their mortgage and make car payments from unemployment benefits, but other bills, including for health insurance, were missing. were not paid. She has enlarged her garden and started raising chickens, but still needs to find a job and could find herself in the restaurant industry, which she said she had not done since 1986 .

“If this other work doesn’t take place in the local community, I’ll just go back to the bartender,” she said.


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