US needs more than benefit cuts to get workers back on the job
About 7.6m fewer people were employed in April than February 2020
Americans are holding back from resuming work even as the rollout of the nation's Covid-19 vaccination gathers momentum. Getting them back into the labour market will require dealing with problems that existed before the coronavirus pandemic.
Concern that something is holding back US workers from taking jobs, along with anecdotes from employers having trouble hiring, has accelerated a trend among state governors to end federal enhancements to jobless benefits in June — three months earlier than Congress intended. The goal is to get people off government benefits and back to work, but it's doubtful this policy change alone will be enough to meet employers’ hiring needs.
About 7.6m fewer people were employed in April than February 2020. Still, even with about 130m Americans fully vaccinated, the number of workers is unlikely to rise rapidly. Government data shows only 1.4m are on temporary layoff, down from the almost 17m in the early months of the pandemic last year and a small fraction of the missing workers. The “low hanging fruit” of easily recalling laid-off workers is gone.
Unlike past recessions, millions abruptly left the workforce as soon as the pandemic began and are still not seeking employment. Moreover, in the 24 states poised to cut jobless benefits early, people who left the labour market since February 2020 represent almost 44% of the 1.2m missing workers. Cutting off jobless benefits to the unemployed is unlikely to get back people who do not want to work and are not receiving benefits. And six of those states, including Texas, have unemployment rates above 5%.
So what would get people back to work as safely and as soon as possible? Small businesses, state governments and Congress all have a role. The best, most-lasting solutions are ones that deal with the problems in the labour market that existed well before Covid-19.
First, small business owners could make it easier for people to go back to work by helping them access the vaccine by, for example, giving them paid time off to get vaccinated or by hosting on-site clinics. According to the Census Bureau, 10% of non-retirees said in early May that having the coronavirus or a fear of getting sick is why they were not working. Businesses that are having trouble hiring could raise wages, but that option may not be possible for many, especially those who suffered through a year of low revenues.
Another way to make jobs more competitive is to make them more appealing to workers. Before the pandemic, one in five workers with a high-school degree or less had jobs with unpredictable hours. Such schedules are particularly common in retail and restaurants — the source of many complaints about hiring. Not being able to control one’s hours or make future plans is even harder during a pandemic, with greater family care responsibilities and transit systems running at reduced capacity. Hours with short notice are especially difficult. Some low-wage workers have less than three days’ notice to show up at work, some of whom are on call. Employers committing to predictable hours and predictable pay would help many workers.
Secondly, state governments could end practices that made hiring hard even before the pandemic. For example, occupational licensing has expanded over the past several decades and now covers almost three in 10 workers, including those with less formal education such as manicurists, barbers and sports trainers. Morris Kleiner, a professor at the University of Minnesota, argues that many of these licensing requirements raise costs to consumers without improving service. They also reduce the supply of potential workers. Cutting unemployment benefits may push people to find a job, but it does not fix the burdensome requirements to hire workers.
Finally, Congress should pass President Joe Biden’s proposals to support people who work in schools, as well as care for the elderly and young children. At present there are 500,000 fewer state and local government employees in education — including bus drivers, school nurses, and cafeteria workers — than before the pandemic. Schools that are fully open will be fully staffed. In addition, opening schools would allow parents, especially mothers of school-age children, who left the labour market last year to get back to work.
Jason Furman, an economist in the administration of former president Barack Obama, and others argue in a paper published a couple of weeks ago that opening schools would not deal with labour shortages, and that other factors such enhanced jobless benefits explain weak job gains. But Misty Heggeness, a senior adviser at the Census Bureau, estimates that more than 1.4m fewer mothers are working now than before the pandemic. Regardless, better support for caregiving is likely to the number of people working. Countries with universal childcare have a greater percentage of women in the workforce than the US.
Efforts to boost employment must work towards two goals: supporting people through a crisis that was no fault of their own, and getting everyone back to work as quickly as possible. The US now has an opportunity to achieve a stronger, more equitable labour market than before the pandemic.
Bloomberg Opinion. More stories like this are available on bloomberg.com/opinion
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.