Gary Cohn: 'We need to force people in many respects' back to work

Gary Cohn, a key architect of former President Trump's 2017 Tax Cuts and Jobs Act, has a new mission.

"We now need to get people back into the workforce and we need to force people in many respects to re-enter the workforce," Cohn told Yahoo Finance Live.

Cohn said he is worried the current shortage of labor threatens to undermine the ability of American businesses to compete at home and globally. The U.S. Department of Labor's latest JOLTS report showed there are almost 11 million job openings and roughly 8.4 million unemployed people in the United States.

"I think it's a huge issue right now, as you point out, labor demand is far outpacing labor supply," Stifel Chief Economist Lindsey Piegza said. But getting the unemployed back on the job, "it's not going to be a very fast or flip the switch scenario," Piegza added.

Cohn points to recent earnings reports from Darden Restaurants (DRI) and FedEx (FDX) which highlighted labor shortages as an issue impeding their growth. "They're not looking for that skilled of a labor force, they need a labor force that's willing to come to work," he said.

'Stop many of these programs'

Federally funded pandemic related unemployment benefits expired at the beginning of September. But various states have extended eviction moratoriums and other measures, like prohibiting utilities from cutting off service for customers who fall behind on their bills. Democrats in Congress are also planning to introduce legislation to restore and extend COVID-19 unemployment benefits into next year.

"I think we have to stop many of these programs at a high level that are encouraging people to stay home and start encouraging to reenter the workforce," Cohn said.

White House chief economic adviser Gary Cohn speaks during a press briefing at the White House in Washington, U.S., September 28, 2017. REUTERS/Yuri Gripas
White House chief economic adviser Gary Cohn speaks during a press briefing at the White House in Washington, U.S., September 28, 2017. REUTERS/Yuri Gripas (Yuri Gripas / reuters)

Cohn supported the federal government's initial COVID-19 pandemic response, "giving money to people, allowing people to pay their bills, allowing people to buy food, allowing people to stay in their shelter, and live their lives. That was very important."

But he said the country is now at the other end of the spectrum and the federal government's new policy should be one that, "incentivizes work and doesn't incentivize allowing people or encouraging people to stay at home."

Private business is trying to entice people to work with hiring bonuses and higher wages. But that is contributing to inflation and undercutting the purchasing power of low income workers and those on the sidelines.

"If you're not entering the workforce, you're not participating in those increased wages. And in fact, you're losing purchasing power because your wages, your subsidies are not inflating with wages today," Cohn said.

Piegza said, "Many Americans have been able to accumulate at least somewhat of a wealth cushion that can carry them forward for some time now, even in the absence of some of these more generous benefits programs, meaning that businesses could still struggle for several months, maybe even to the first of the year before these individuals on the sideline decide to move back into the labor market."

Cohn says hiring bonuses won't solve the problem. "We've got to start talking about how we motivate people back into the labor force and how do we get them back working again?"

Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm. Follow him on Twitter @Ajshaps

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