Billionaire investor says Biden should pay people to go back to work after five million quit during pandemic
Billionaire investor Barry Stenlicht says that the reduced US workforce after the Covid-19 pandemic is crippling the economic recovery as five million people are still missing from payroll figures.
The founder of Starwood Capital Group, which operates hotels among its various business lines, told CNBC’s Squawk Box that he believes that the federal government should pay people to go back to work rather than stay at home.
“The whole service economy is in a crisis, whether it’s a restaurant, a pizzeria, a laundromat, a small shop. Amazon can raise wages, no problem,” he said, adding that small businesses cannot.
He acknowledged that while wages were increasing at the lower end of the wage spectrum, which is a good thing, sometimes the reason people aren’t returning to the workforce is not about the money.
Citing one of his own hotels in Brooklyn, he said they are trying to fill 40 vacant positions out of a total staff of 220. “It isn’t even what we pay,” he said.
Mr Sternlicht believes that the government should redirect spending away from helping the unemployed and supporting struggling businesses to incentivising people to return to work.
“They should actually pay people a bonus for going back to work and getting back in the labour force, off federal programs and state programs,” he said. “Then they tax them because they have a job.”
Mr Sternlicht said that Joe Biden’s administration is “overdoing it in the wrong direction. All these support programs ... may exacerbate that problem and encourage people to stay home. And the country can’t really work without its service people back.”
Some business owners have blamed additional federal unemployment benefits rolled out during the pandemic for incentivising people to stay at home, but those expired on 3 September.
Further to that, some companies in states that ended the programs months earlier are still struggling to find workers to fill vacant positions — this implies that a wider phenomenon may be at play.
The labour shortage is being further exacerbated by the phenomenon known as the Great Resignation — Americans continue to voluntarily leave their jobs in record numbers as the pandemic has allowed many to rethink what they want from their working lives.
This may offer one insight into one aspect of why people have remained out of the workforce. The pandemic offered them an opportunity to take stock of their working lives as they were either forced to work from home, their job disappeared or they were furloughed, or they suddenly found themselves under huge pressure, performing essential functions in difficult circumstances — everything from food and retail to medical and civic functions.
As people reevaluated their working lives, many also clung to existing jobs during the worst of the pandemic. This created a hangover of pent-up resignations — there were 6 million fewer voluntary exits from employment in 2020 than in 2019.
Since March 2021, approximately 4 million people a month have resigned from their jobs, so far peaking in August at 4.3 million.
This is a sign that workers believe they have leverage in a jobs market defined by labour shortages, as the economy rebalances in what is hoped to be the slow end off of the Covid-19 pandemic.
Wages are rising quickly as businesses struggle to hire staff and many companies are adding signing bonuses and reviewing benefits packages in the hope of attracting new employees and retaining existing talent — Mr Sternlicht appears to believe that the government should be adding to this effort in some form.
The number of people resigning is particularly high in the leisure and hospitality sector, as noted by Mr Sternlicht at his New York hotel, but people are quitting their jobs across a whole range of industries, the Bureau of Labor Statistics reports.
Professional and business services, healthcare and social assistance, and retail all saw huge numbers of resignations in August.
According to the monthly Job Openings and Labor Turnover Summary (Jolts) report, there were 10.4 million job openings at the end of August – down from July’s figure but still near a record high. The labour force participation rate, the measure of who is actively looking for work, has also dropped.
Bloomberg notes that there are five million fewer active workers now than pre-pandemic, and the reason why might be because the pandemic disrupted the labour market much more than at first thought.
Workers say that they cannot find a full-time job in their field, others have to take care of children or elderly family members, some say they are waiting on the promises of a previous employer, and more still fear contracting the coronavirus in the wake of the summer surge of cases of the Delta variant.
Much like the supply chain issues gripping the US and other parts of the world, restarting the economy and the job market is not as simple as flipping a switch, but more a case of recalibrating an engine.
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