You’ve probably heard about the Florida McDonald’s that is paying people $50 to just show up and interview for a job.
Sandwich vendor Jimmy John’s is giving signing bonuses to new employees.
Restaurants, one of the hardest hit businesses during the COVID-19 lockdowns, are now having a hard time finding enough workers.
Are generous unemployment benefits contributing to the difficulty in finding workers?
American Enterprise Institute economics scholar Michael R. Strain argues that generous unemployment benefits aren’t the dominant factor in the labor shortage—yet. There are some other hindrances.
In particular, women who have children whose schools, or day care centers, are not fully operational face hurdles in getting back into the workforce. Others are simply still afraid of the virus.
However, as COVID recedes, generous unemployment benefits may end up becoming the dominant factor in keeping people out of the workforce. Extra unemployment benefits expire in September, and, not unexpectedly, progressives are clamoring to extend them.
The extra amount is $300, added to the weekly check, which would ordinarily be calculated to be around half the beneficiary’s weekly pay. One study estimated that with the supplement, 48 per cent of recipients would be making more than they did working.
Strain says that conservatives had better be prepared with good arguments against extending the extra benefit. Strain says that progressives already have marshalled three arguments—none of them, he believes, persuasive. Strain explains:
First, they say, fear of the virus and slack labor markets meant that generous benefits did not significantly increase the numbers of workers unable to find jobs. Therefore, the argument goes, they will not this summer.
But in normal circumstances, larger unemployment checks increase the length of time people spend unemployed. As fear of the virus fades, economic activity will normalize. As the economy booms, labor markets will tighten, making workers on the sidelines a bigger brake on the recovery.
Second, the progressives say, unemployed workers will know that the extra benefits expire in September, and won’t delay accepting a good job offer for fear of missing out on opportunities available immediately.
But the summer will likely see employers chasing workers, rather than the other way around. The unemployed will feel they have ample options, and generous government compensation will lead them to take longer to accept a job than they should. Moreover, the supplement will stay in place for an additional four months. That’s a long time.
Third, expect to hear that surging monthly payroll gains are prime facie evidence that unemployment benefits aren’t lengthening jobless spells. Economists making this argument should know better, expert as they are in counterfactual reasoning. Two things will be true at the same time this summer: The economy will add over one million jobs per month, and it would have added even more jobs if unemployment checks were right-sized.
Longer jobless spells are bad for the economy because they will reduce the ability of supply to keep up with surging demand, adding to inflationary pressures. They are bad for businesses that need workers. And the longer people are idle, the harder it is for them to get back to work.
Strain suggests that the $300 supplemental should be converted into a one-time reemployment bonus
This would encourage going back to work, but may be a hard sell with progressives who seek to undermine the age-old tie between work and rewards.