One year ago, as it became clear the United States was in the throes of a devastating pandemic, we lost 21 million jobs. Now we’re recovering from Covid-19 but workers aren’t rushing back to full employment at the pace economists expected. What’s happening?
In retrospect, while the pandemic had a devastating impact on the US economy, it affected some Americans more than others. For example, the wealthy and well-connected fared better than the less fortunate. (https://www.nbcbayarea.com/news/california/california-revenues-soar-as-rich-get-richer-during-pandemic/2479807/ ) If you were a lawyer, with a good Internet connection, you were more able to work from home than was an agricultural worker. As another example, some business sectors — such as leisure and hospitality — lost jobs while others — such as communications — stayed close to steady state.
At the moment, the economy appears to be recovering — the Bureau of Economic Analysis reported: “Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021.” On the other hand, workers have not reentered the labor force at the rate anticipated — Reuters ( https://www.reuters.com/world/us/us-job-growth-far-below-expectations-april-amid-labor-shortages-2021-05-07/) noted: “U.S. job growth unexpectedly slowed in April, likely curbed by shortages of workers and raw materials… Nonfarm payrolls increased by only 266,000 jobs last month… That left employment 8.2 million jobs below its peak in February 2020.”
As one would expect — in a deeply polarized country — there’s a Republican explanation for what’s happening and a Democratic explanation. The Republican explanation is that Biden-Administration unemployment policies have disincentivized workers from actively seeking jobs. That is to say, Republicans view the “hesitant” workers as “welfare chiselers;” folks who are inherently lazy and would rather stay at home, collect unemployment benefits, and “do nothing.”
Recently, the U.S. Chamber of Commerce urged the government to scrap the weekly unemployment subsidy. Politico (https://www.politico.com/news/2021/05/14/labor-shortage-companies-hiring-488200 ) reports: “At least 14 states, including North Dakota, Alabama and South Carolina, have moved to cut off enhanced federal jobless benefits that were supposed to last until September. Florida is among roughly 30 states reinstating a requirement that the unemployed prove they are looking for work to receive state benefits. Montana is offering return-to-work bonuses to unemployment recipients who accept a job offer.” Writing in Alternet, Isaac J. Bailey (https://www.alternet.org/2021/05/reagan-era-myth/? ) wrote: “An increasing number of Republican governors have decided to scale back enhanced unemployment benefits. They claim that it’s necessary, that it’s the only way to get those who have been receiving benefits through this pandemic to go back to work. In short, those governors, along with conservative economists, have convinced themselves the working poor would rather be on the dole than man hot kitchens, wait on tables or stand on their bunions for several hours a day in retail settings to earn poverty wages.”
The Biden Administration resists this approach (https://www.reuters.com/business/white-house-jobs-report-shows-long-way-go-economic-recovery-2021-05-07/): “‘It’s clear that there are people who are not ready and able to go back into the labor force,’ Treasury Secretary Janet Yellen told reporters, citing parents whose children are still learning remotely. “‘ don’t think the addition to unemployment compensation is really the factor that is making a difference.'”
Liberal economists suggest that the problem is elemental: employers want workers to retake the jobs they held, before the pandemic, at the same wages they were paid then. EPI economist Heidi Shierholz (https://www.epi.org/blog/u-s-labor-shortage-unlikely-heres-why/ ) observed: “I often suggest that whenever anyone says, ‘I can’t find the workers I need,’ she should really add, “at the wages I want to pay.’” She continued: “The footprint of a bona fide labor shortage is rising wages. Employers who truly face shortages of suitable, interested workers will respond by bidding up wages to attract those workers, and employers whose workers are being poached will raise wages to retain their workers, and so on… And right now, wages are not growing at a rapid pace… Unsurprisingly, at a recent press conference, Federal Reserve Chairman Jerome Powell dismissed anecdotal claims of labor market shortages, saying, ‘We don’t see wages moving up yet. And presumably we would see that in a really tight labor market.’”
The Democratic view is that workers are hesitant to return because of a variety of structural issues — for example, the hesitant workers are mothers who have been caring for their children who, because for Covid=19, could not go to school or daycare. In an interview with Mother Jones, economist Heidi Shierholz (https://www.motherjones.com/politics/2021/05/you-dont-need-to-freak-out-about-labor-shortages/? ) noted: “There’s evidence that points to other things that may be going on [that account for labor shortages]. We know that more than a quarter of schools were still closed to in-person learning in April. One of the things we saw in the April data is that… the disappointing job growth in April was caused by an increase in job separations, basically layoffs and quits. The increase in layoffs and quits was driven entirely by women. That points to another cause, given that women still shoulder the lion’s share of care responsibilities in the home. I think health concerns are still a big issue as well. With the distribution of the vaccine, that’s going down, but there are still lots of people who have serious, legitimate health concerns about returning to work.”
When informed of the disappointing jobs report, President Biden said: “Today’s report just underscores, in my view, how vital the actions we’re taking are — checks to people who are hurting, support for small businesses, for child care and school reopening, support to help families put food on the table.” Biden added the report is indicative of the long-term nature of the economic recovery, saying he expects improvement to be “a marathon,” rather than a “sprint.”
Americans are going back to work carefully. And demanding a living wage.