Unemployment benefits do not create a labor shortage, they empower workers
As businesses began to reopen, we have come under increasing criticism from business owners, especially from restaurants and similar service-based workplaces, who insist that ‘they are facing a labor shortage. The argument, some argue, is that unemployment benefits are too generous and discourage work, leaving employers unable to hire workers. Fortunately, these stories are refuted by workers, journalists, and analysts armed with a combination of personal experience and hard data. As expert after expert dismisses the flaws in employers’ arguments, it has become clear that what worries employers is not a labor shortage at all: it is a shift in power.
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For years, employers have had access to a workforce where workers were so desperate they would take any job offer. The combination of poverty-level minimum wages, historically low unionization rates, jobs at will, poor classification of workers, a failing safety net, lack of paid time off or employer-sponsored benefits, and a host of other policies and practices have firmly tipped the scales toward employers, allowing for pervasive exploitation and abuse, especially for the near 3 out of 4 Americans are living paycheck to paycheck even before the pandemic.
The situation is more dramatic after a job loss. Recently laid-off workers are likely to have almost no safety cushion – more than half of consumers had $ 3,000 or less in their combined current and savings accounts in 2019. They may also not have access to unemployment benefits – just 28 percent of eligible unemployed in 2019 actually received benefits. It makes workers desperate for any job, no matter how terrible, that can help them get by. During a recession with mass layoffs, as millions of people face the same desperation, companies have all the power to offer dangerous jobs in places like overcrowded meat packing plants and bustling restaurant kitchens in overqualified candidates with meager pay, unless the government intervenes.
Unemployment insurance, especially enhanced benefits during the pandemic, gives workers leeway. Benefits are not enough for people to live large – even with the extra $ 300 per week, unemployment benefits will be significantly lower for a modest family budget. every county in the country. The benefits simply leave the workers slightly less desperate, easing the pressure to take on dangerous jobs – many of which are particularly dangerous during a pandemic – that pay poverty wages. Instead, they can wait a little longer for higher paying jobs that match their skills, education, experience and interests.
A dishwasher, Jeremy, told reporter Eion Higgins that “the stimulus and unemployment benefits have certainly helped me to be more picky about the jobs that I will take because I have nothing to take to cover the rent and the groceries”. Another, Alan, said that “I have a degree in forestry and because I am currently relatively secure financially, I can take longer to find a job in the field in which I really want to work”. A third, Owen, said: âI left because having free time to think and plan has helped me focus my desire to be better paid and better treatedâ¦ I expect to win over. minus the double and finally to have nights and weekends off. I hope I will be treated with a little more dignity, but I know that is not always the case.
It is very different from saying that unemployment benefits discourage work in general. Unemployment insurance studies have shown that laid-off workers who receive benefits search for more jobs, receive better paid offers, and assume roles that better match their level of education. Specifically during the pandemic, several studies looked at the improved benefits of $ 600 and found that they had little at no effect on employment or job search. It’s hard to see how the current $ 300 increase would be any different.
Few workers even had access to unemployment insurance in the first place.
Despite what many companies, commentators and lawmakers try to argue, the data continues to prove that UI does not prevent hiring. While overall employment growth in April was disappointing, the leisure and hospitality sector – where most of the employers’ cries of labor shortages come from – in fact accelerated job growth with 206,000 hires in March and 366,000 in April. In total, 430,000 people joined the workforce (meaning they weren’t looking for work before but are now), but this growth is entirely due to men while women left the working population on the net in April, suggesting it has more to do with a continued lack of child care. States with higher unemployment benefit levels, as well as low-wage sectors where benefits are more often higher than previous incomes, have in fact seen faster job growth, indicating that unemployment insurance is not the cause of the slowness in hiring.
In fact, few workers even had access to unemployment insurance initially. From April 2020 to January 2021, only 18% of the unemployed had received unemployment benefits in the past two weeks at some point. It’s even worse for black (13%) and Asian (11%) workers and those without a college degree (12%), all of whom are overrepresented in low-wage sectors like recreation and hospitality. Undocumented immigrants are also totally excluded from unemployment insurance, yet they are 10 percent of restaurant workers nationwide and nearly 40 percent in cities like New York and Los Angeles. We saw the consequences at the start of the pandemic when meat packing plants convinced the government to declare them essential, allowing them to recall their employees to work and leading to major COVID epidemics among their workforce, disproportionately made up of immigrants and people of color, and in communities where the the plants are located.
Even so, employers have managed to complain quite loudly that they may have lost a hint of power as sympathetic lawmakers rush to accommodate them. In mid-May, in 16 states and counting, Republican governors had announced their intention to prevent all their residents from receiving their legitimate federal unemployment benefits, citing anecdotes companies struggling to hire at their current salaries as a justification. End these benefits before the jobs are there and while millions still losing their jobs each month will cost billions of dollars – over $ 10 billion to nearly 2 million unemployed in an estimation – outside the economy in these states, even if some of these cut people find work, and will effectively slow down the recovery thanks to reduced spending.
If there was a labor shortage, employers have common sense options to make themselves more competitive: they could raise wages to acceptable levels, such as many companies have succeeded in doing so or are lobbying their fellow lawmakers to support immunization efforts and fund safe and affordable child care. Instead, some companies rely on half-measures, such as offering one-time signing bonuses, precisely because they know these are insignificant compared to what a worker would gain from. long term with ever higher wages. Many others are simply pushing the same narrative they have fallen back on for over a century – through the New Deal, the Great Society, welfare reform and the Great Recession – by claiming that workers who dare to demand more are lazy and ungrateful. It is no coincidence that the same people who are now crying to end unemployment benefits are also opposing the Raise the Wage law, the PRO law and other measures that could materially improve lives and strengthen the power of the workers.
This power struggle has made its way to the president’s office. In a white house monday speech, President Biden said: “Anyone who collects unemployment who is offered a that suits must take work or lose unemployment benefits. (Our emphasis.) Now the government must decide who should define âsuitableâ. Businesses would like this to mean the pre-COVID status quo: low wages, inconsistent hours, minimal benefits (if any), and limited protections. Workers want this to mean that jobs are secure and offer a decent quality of life – including decent wages, manageable hours, and accommodations for care and quality of life.
The Biden administration has taken positive steps to define a good job for federal contractors, set a minimum wage of $ 15, raise standards and strengthen anti-discrimination protections. It is vital that the administration continues to support all workers in the face of the overwhelming power of employers. There is no shortage of means: they can put pressure to improve the unemployment insurance system through federalization or the establishment of minimum standards and automatic stabilizers, such as those proposed in the Wyden-Bennet reform bill; pass it Wage Increase Act increase the minimum wage to $ 15 and eliminate lower wages; implement better regulations and their enforcement to prevent pay theft, overtime abuse, misclassification, and OSHA safety violations, among other abuses; pass it PRO Law ensure that workers can exercise their right to form unions; and more.
We cannot continue to give employers all the power in the labor market. President Biden and other lawmakers must make it clear that now is the time to stand with workers and give them a say in their own working conditions and livelihoods.