HARDISON’S TIPS – MAY 3, 2021 – Unemployment Is High. Why Are Businesses Struggling to Hire?
There are two distinct, and completely opposite, ways of looking at the American job market.
One would be to consult the data tables produced every month by the Bureau of Labor Statistics, which suggest a plentiful supply of would-be workers. The unemployment rate is 6 percent, representing 9.7 million Americans who say they are actively looking for work.
Alternately, you could search for news articles mentioning “labor shortage.” You will find dozens in which businesses, especially in the restaurant and other service industries, say they face a potentially catastrophic inability to hire. The anecdotes come from the biggest metropolitan areas and from small towns, as well as from tourist destinations of all varieties.
If this apparent labor shortage persists, it will have huge implications for the economy in 2021 and beyond. It could act as a brake on growth and cause unnecessary business failures, long lines at remaining businesses, and rising prices.
What explains the disconnect? There are competing theories, all plausible — and potentially interrelated. Meanwhile, the economic and public health situation is evolving too quickly for research to keep up. So consider this a guide to these potential explanations, and an accounting of the evidence for each.
Business leaders have been quick to blame expanded unemployment insurance and pandemic stimulus payments for the labor shortages.
The logic is simple: Why work when unemployment insurance — including a $300 weekly supplement that was part of the newly enacted pandemic rescue plan — means that some people can make as much or more by not working? And the combined $2,000-per-person cash payments enacted since late last year created a cushion people can rely on for a time.
Ample economic research shows that more generous unemployment benefits are a disincentive for people to seek or accept work. But several studies on what happened when a $600 weekly supplement was added to benefits last spring suggested that the early pandemic had unique dynamics.
Research by IoanaMarinescu, Daphné Skandalis and Daniel Zhao, for example, found that every 10 percent increase in the jobless benefits a person received corresponded to a 3 percent decline in the number of jobs applied to. But in the context of mass closings of businesses, that didn’t matter for how many people were employed — there were still far more job seekers than jobs.
Make It A Champion Day!
