As more Minnesotans are vaccinated against COVID-19, the features of a post-pandemic world are emerging: maskless faces, hugs — and “Now Hiring” signs on storefronts and businesses. It seems everyone’s hiring, from restaurants to big box stores to bars, and many of them are struggling to find enough workers to fill their open positions.
At the same time, there are a lot of people still out of work. And workers who are on unemployment are receiving an extra $300 per week through the federal American Rescue Plan passed earlier this year.
Lots of people — pundits, employers, politicians — are sure that those extra unemployment benefits are a problem, incentivizing workers to stay home instead of looking for work. In fact, 25 states including Montana, Florida, Arizona and Ohio, are ending the weekly supplemental benefit early in an effort to push unemployed workers into jobs.
But is a $300 weekly benefits bump really enough to keep unemployed workers from taking jobs?
Measuring unemployment
Unemployment in Minnesota hit 4.1 percent in April — just a bit higher than the low unemployment before the pandemic and the lowest it’s been since the pandemic began in March of 2020.
That sounds like good news, but the actual workforce picture is a little less rosy. The standard unemployment rate only measures the percent of people who are out of a job and looking for work. It doesn’t include people who are out of a job and have stopped looking for work. And data suggest that for whatever reason, there are plenty of people in this boat.
Since early 2020, Minnesota’s labor force participation rate, or the percent of people 16 and older who are working or actively looking for work, has dropped from 70.2 percent to 67.7 percent, the lowest it has been since June of 1978, when far fewer women were in the workforce. If you compare that drop to the size of Minnesota’s population age 16 and older, it means roughly 112,000 fewer people in the workforce compared to a little over a year ago — a loss comparable in size to the population of Rochester, Minnesota.
Throughout the pandemic, a historically high number of people were unemployed. Because of the crisis this posed to the economy, the federal government added supplementary unemployment payments to the usual amounts people were eligible for.
Under the federal CARES Act, passed last year, people on unemployment received an extra $600 per week from early in the pandemic through July. By executive order of former President Donald Trump in August, people on unemployment got a $300-extra-per week from the federal government. Under the American Rescue Plan, the extra $300 per week was extended to September 6.
Minnesota’s unemployment system pays people half their former weekly wages, up to $740. With the $300 supplemental payment, the maximum a person on unemployment in Minnesota would be making is $1,040, or $26 an hour for a 40-hour workweek. But DEED Commissioner Steve Grove said the vast majority of people on unemployment are making far less than that.
Is that enough to keep Minnesotans out of the workforce?
“Firms definitely think that,” said Ron Wirtz, the director of regional outreach at the Federal Reserve Bank of Minneapolis, said in an interview last week. “We do a lot of survey work, and we have started asking them about their impressions about why labor availability is tight, and that does tend to be the top thing that they’ve mentioned — just that unemployment insurance benefits are very generous, and that’s what’s keeping people out of the labor force.”
Labor market frictions
Actually pinpointing the effect of the extra unemployment benefits is hard because there are lots of other factors causing friction between workers and jobs right now, Wirtz said.
One, Wirtz said, is that many workers are still fearful of getting or spreading COVID-19. While more than 50 percent of Minnesotans have been vaccinated against COVID-19, lots of people, younger children included, aren’t yet vaccinated.
“The fear of COVID is still out there, especially for multi-generational households,” he said, citing surveys. While that share is likely getting smaller, it’s not non-existent.
Another is a mismatch between the jobs that are open and the jobs workers want or are qualified for. Job counselors surveyed by the Minneapolis Fed and the Department of Employment and Economic Development found a significant number of job seekers are looking for telework options.
“There are a lot of people that are laid off and didn’t have that option, and think, ‘I think I would like that option,’” Wirtz said.
Others might not be qualified for the jobs that have lots of openings: the construction industry, for one.
“We have a lot of hospitality workers that are not working right now. They can’t easily go into construction very well even though there are tons of openings in construction,” Wirtz said.
Another factor is family care issues.
Some childcare providers have operated at lower capacity, and others have operated intermittently due to COVID-19 cases, something that can make it much harder for parents with kids to come back to the labor market if they are away.
Julia Pollak, a labor economist at ZipRecruiter, a company connects job applicants to employers, said some parents with the option to stay home might not see the point of going back to work right now, with kids in school for just a short time before being home over the summer vacation starting soon. Once kids are back full time in September, there may be movement back into the labor force.
Combined, all these issues paint a complicated picture of Minnesota’s and the country’s labor market as the pandemic wanes.
“It seems easy: if you’re unemployed, and there are lots of jobs, well just go get a job,” Wirtz said. “I think the pandemic has shown that life is complicated and it’s more complicated the more you dig into the different households, and the different obstacles they might have in easily reattaching to work.”
Wirtz said there’s no question that enhanced unemployment has smoothed over some of these frictions for people, allowing them to reevaluate their job situations in some cases, but the extent to which it’s that extra money or the issues workers are facing in getting back is hard to tell.
“It’s safe to say that enhanced unemployment benefits are affecting some workers. How many, I think that’s a really important question that I don’t think we know the answer to,” Wirtz said. “I think I’m pretty safe to say it’s likely more than those claiming that it has no effect. And I think it’s likely less than those who believe that the pandemic-era unemployment [is] the only reason why people aren’t working now.”
While some say it’s the $300 weekly unemployment payments keeping workers home, others say firms simply aren’t paying workers enough to make working worth their while.
This may be an issue, but it’s not accurate to say that’s the only reason employers are struggling to find workers, Pollak said.
The shortage of workers has put upward pressure on wages at lots of employers — Target, WalMart and other major chains among them. The number of Minnesotans on unemployment is dropping week by week. And some workers are being drawn in by higher wages — and many of them are not people who were on unemployment in the first place, Pollak said. At the national level, for example, teenage employment is higher now than it was before the pandemic as young people seek jobs, suggesting teens are being attracted into the labor market by higher wages.
A natural experiment
Soon, it may be easier to tell how big an effect the extra $300 per week has had. The supplemental benefits through the American Rescue Plan go through Sept. 6 of this year, but at least 25 states are ending them early, creating a sort of natural experiment where researchers may be able to see if more people go back to work in states where the benefits have ended.
Pollak said economists will be working to tease out the effects of ending the $300-per-week benefit versus some of the other differences in the states ending them early.
But for now, Pollak said any easy answer ignores the complexity of the labor market.
“I think the two things that are definitely wrong: the idea that unemployment benefits are having no effect, and the idea that they’re fully responsible are two extremes and completely wrong,” she said.“It’s just important to recognize that the labor market is complicated — that job seekers are complex, they have lots and lots of different motivations,” she said.
How many people prior to covid and this additional benefit were working the crappy low paying job as their third or fourth source of income, and may be working that job part time? An such individuals would be foolish to go back to those jobs, and instead focus more on family and home, with the extra cash covering for them.
When asking the question, are people being kept out of a certain labor force because they are getting a few hundred dollars a month, it is important to also ask the question, why do we have an actual labor sector where that small amount of money matters so much?
$300 a week is $1200 a month and for a lot of people, that’s the rent. So in essence, a lot of people have let the federal government pay their rent for them for the past year or so. Why would any minimum wage earner who passed junior high math give that up? It’s called “human nature.” I’m not an economist but I apparently know more than the ones “studying” this.
Why would any other worker, set to see their wages rise in the face of the first labor shortage (as artificial as though it may be) in generations, want them to EVER come back. Behold, the power of workers to take back control of the system, should they ever decide to get around to realizing it.
Yup. You’ll just have to take my word for it that $300 x 4 = $1200.
Quality businesses that value their employees & that pay a living wage are getting employees.
The others have problems getting employees, and keeping them.
Isn’t that something !
“Firms definitely think that,” said Ron Wirtz, the director of regional outreach at the Federal Reserve Bank of Minneapolis, said in an interview last week. “We do a lot of survey work, and we have started asking them about their impressions about why labor availability is tight, and that does tend to be the top thing that they’ve mentioned — just that unemployment insurance benefits are very generous, and that’s what’s keeping people out of the labor force.”
Of course they are going to say they think that. The alternative is to admit the jobs they are seeking to fill aren’t very attractive, whether that is due to low pay or other circumstances. Who is asking the workers why they aren’t returning to these jobs?
The government is 30 trillion dollars in debt. Both parties refuse to make any attempt to balance the budget. And I don’t want to hear about the “new economic theory” There will be a point in time when the party stops, and maybe somebody will remember this day. When people were allowed to not work because they didn’t like the jobs and they made more sitting at home.
How about that 2017 tax cut for the wealthy? Didn’t that push us farther into the red? And what about working people who have children and need to look after them, or whose working conditions are unsafe? Many unemployed are using this time to get more education – aren’t people always telling them to do so if they want to earn more money? If businesses can’t – or won’t pay – their workers fairly, then their business model isn’t adequate. the US Chamber of Commerce is behind this, which tells us everything we need to know.
This money runs out in September. Perhaps one should look at the financial position of the long term unemployed. How many thousands in bills do they owe. Do they in so called tips positions in which the actual weekly wage for 40 hour a week is under $100 a week often with no benefits? Sorry, but tips are not a solid basis for paying bills. In a free market, if you cannot find workers, you increase your pay. The tipped wage worker rate needs to go up $5 an hour to get close to tge regular minimum wage. Start there!
Minnesota is one of the few states that require restaurants to pay tipped workers full minimum wage.
If you travel to less generous states, you will notice that the restaurant prices are about the same there as here.
Indeed, it’s complicated, but in addition to Joel Stegner and Mark Snyder, I’m inclined to go with Greg Laden’s last paragraph. Why do we have an economy where $300 a month is given such importance that it’s deemed either “essential” or “far too generous?”
In effect, those Governors who are cutting off federal unemployment benefits early are standing behind low-wage workers with a shotgun and telling them “Go to work or else. It doesn’t matter (to me) if the job and the pay is crappy or not.” By most definitions, that would qualify as extortion, falling back on the Mafia line of “making him/her an offer he/she can’t refuse.” Once more, the message being sent is that workers are expendable and unimportant. Gosh, I wonder how many of those Governors are Republicans?
It’s $300 a week. On top of their regular weekly unemployment payment from the state.
So the answer to the question posed in the headline is “yes”. There may be a lot of reasons people are not taking the jobs that are available but I think that extra cash allows them to do so, at least for those who would be forced to take a low wage job. The answer is to pay enough to make it worthwhile to take those jobs.
Just another example of how living wages would boost the economic recovery and lure more people to more job applications. I’m surprised Ms. Kaul didn’t mention the elephant in the room that appeared over the last couple years… our decreasing population. The elimination of immigrant workers at a time when US death rates are rising and birth rates stalling means there may actually be a REAL shortage of available workers in the prime age group. We were told for decades that immigrant (documented and otherwise) were adding trillions of dollars to the economy and filling critical labor force demands, but nationalistic fascism won the day and we’re seeing the result.
The entire narrative that has/is emerging here is an old reliable neoliberal complaint… rising wages are a crises when those wages belong to someone other than gazillion dollar executives. Employers will complain that they can’t find the cheap labor they were accustomed to, but they never should have become accustomed to cheap labor in the first place.
There is no labor shortage. What we have is a shortage of workers willing to work for a wage that employers want to pay. The employers up here in the Arrowhead are upset that their pipeline of cheap foreign workers has been interrupted. They grew accustomed to hiring them for minimum wage while at the same time gouging them for housing. Now they are forced to pay workers a living wage and they hate it.
No full time warehouse or production worker is paid minimum wage. I use warehouse or production because these are the most common, by far, full time positions for the unskilled. Generally, these jobs pay $15 + today. You can walk in anywhere and start at these wages.
But to address this article, we shouldn’t end federal unemployment aid until September. This was the deal, and people scheduled accordingly. If we can hand out billions in PPP to completely undeserving companies, a staggering and bizarre handout to the least needy, we can honor our commitment to working folk.
Save yourself the pontification and ask a small business owner if he can find workers? Before the pandemic there was record low unemployment for every group, now no one is going in for job interviews. Companies are paying people just to come to an interview. What is the difference? It is not that complicated, just ask an owner.
As stated above, no business owner is going to say they can’t find workers because they aren’t offering high enough pay, even though that is the reason in many cases. They will point to literally anything else before admitting that. If you want to learn why workers aren’t returning, try talking to the workers.
Thank you Mr. Snyder.
Nobody is mentioning the demographic shifts.
About 1 million more baby boomers retired than expected during the pandemic (3 million vs expected 2 million).
https://www.pewresearch.org/fact-tank/2020/11/09/the-pace-of-boomer-retirements-has-accelerated-in-the-past-year/
Over 500,000 students took a “gap year” rather than attend online college.
https://www.studentclearinghouse.org/blog/fall-2020-college-enrollment-declines-2-5-nearly-twice-the-rate-of-decline-of-fall-2019/
Put those together and you get a gap of 500,000 in job openings vs job seekers.
Immigration was always going to be necessary to replace the retiring boomers but that spigot turned off for the last year.
https://www.americanimmigrationcouncil.org/research/impact-covid-19-us-immigration-system
COVID itself is also going to have an impact. 600,000 people died and over 1 million more are suffering from the long-term effects of their infection (2.3 million total hospitalizations, survivors with heart damage, lung damage, “long hauler” symptoms).
https://jamanetwork.com/journals/jama/fullarticle/2771581
Not all of the people affected by COVID were in the labor market (retired) but enough of them were to make an impact. Some people who would normally be part of the labor market have become caregivers for people with long term illness due to COVID.
My girl friend was making $940 a week when she lost her job thanks to the government decision to make the place she worked close down and people stay home. As a result she collected $470 from the state and $600 from the Feds. This $600 ran out sometime in summer and then she collected $300 from the Feds until Labor Day. Then at the beginning of the year she began collecting the $300 a week again from the Feds. It’s crazy that she made more on unemployment (with the $600) than working but then again it was the government that took her job away. The Feds should have just made up the difference of what the state paid and what the worker formerly made. I do not blame her ( or anyone else) for collecting the unemployment until it runs out because she (they) also lost all her benefits too as the result of the governments decision. If you want people to say home to prevent other people from contracting a serious disease and perhaps dying, that’s the price you are going to have to pay. She would have kept working if not for the government decision.
These policies hurt small businesses far far more than corporations. In fact corporations can easily afford to pay more compared to small business and the lights in getting rid of what little competition is left
“When people were allowed to not work because they didn’t like the jobs and they made more sitting at home.”
It’s funny how some people NEVER recognized the fact that we are/were dealing with deadly pandemic. Even now, after over a year and half a million deaths, and hundreds of thousands of horrid hospitalizations and suffering, these people STILL fail to comprehend the scenario. They cling to the bizarre notion that the “government” just shut things down to make life more difficult for businesses. As if trillions of dollars never got pumped into the economy and nobody but them recognized we were in a recession.
And it’s always entertaining when people who organize their entire adult lives around dodging taxes whine about deficits and debts, as if there’s some other way of paying for the services they depend on. It just goes to show… the problem with being disconnected from reality is that you can’t connect when you need to.
From the Trump tax cut, it is reported that the late Las Vegas gambling mogul Sheldon Adelson got a $750 million dollar tax cut. Funny, but when billionaires get government money, nobody ever complains about the impact on their work ethic.
Another number – 20%. That is the average percentage of non-reporting of income by top 1% uses on their federal tax return. Tax fraud part of the reason why billionaire Trump paid no income taxes for many years. His wealth explains why his sons never had to work.
On the other hand, there are some who think we cannot let poor people have a little extra savings and cannot allow employees to pay workers more in a tight labor market. They also think it OK to let our richest men be income tax freeloaders. That is how Republicans think.
An annoyance about this article: by definition, people who have left the workforce are not getting ANY unemployment, let alone the “extra” $300 a week. While it’s relevant to the employment story, it’s irrelevant to whether the extra is keeping them from taking jobs. Sadly, this wasn’t unpacked at all as to why there are people who are not taking jobs.
As for a labor shortage–no such thing. Especially since MN was already experiencing one BEFORE the pandemic. It’s supply and demand. If you’re paying enough, someone will take the job. If you’re not getting employees, you’re not paying enough. And if that means someone who could work isn’t working, well, I guess if a person is going to be poor, they just as well have free time. If life is going to be all about making money so that all you can do is pay bills, what’s the point?
That said, there are lots of qualified people looking for work and not getting hired. I wonder how long everyone will hold out until someone can convince the government that we need to import some “skilled labor” (at lower than market wages). Back in the day, when I had just finished my PhD, I was having poor luck finding a job. Finally, after several months, I got a call from a recruiter with a position that seemed fit my technical background, at least based on their cursory description. They seemed to be taken aback when I asked them, “how much?” (I mean, really?!) And even more taken aback when I scoffed at $24k. I explained that I had just spent the last 5 years of blood, sweat, and tears (literal, at times) so that I didn’t have to be anyone’s unskilled technician because I had been there, done that, and didn’t get paid enough to suck it up. Call me when you want a highly trained scientist and you’re willing to pay enough for me to pay both my regular bills and my student debt. Ultimately, I ended up in a different career because my technical degree (and a bunch of other skills, I had accumulated over nearly 10 years of school past high school) had value in a different field. I am extremely lucky that I love my job, I use my educational training, and I’m paid well. Others, not so much. I know multiple highly skilled people who have been looking for a job for over 9 months with no offers. There are, by the way, lots of unpaid internships out there looking for multiple years of experience. I’m not even exaggerating.
Have they looked at immigration?
(1) The hospitality and service sectors have always relied on those least able to organize, automatically depressing wages.
(2) With undocumented workers needing to work for cash, now wouldn’t be an auspicious time for either employers or workers to risk being exposed—ICE isn’t backing off its aggressive tactics, and
(3) many, even legal, immigrants, especially from Latin America and Africa, have an ongoing, justified fear of being profiled.
Basically, the working poor subsidize the wealthy in this country.