America’s vanishing workforce

Federal and state officials, who spent the last year trying to keep Americans safe in their homes during the pandemic, are suddenly grappling with the opposite problem: how to lure them back to work.

At least 14 states, including North Dakota, Alabama and South Carolina, have moved to cut off enhanced federal jobless benefits that were supposed to last until September. Florida is among roughly 30 states reinstating a requirement that the unemployed prove they are looking for work to receive state benefits. Montana is offering return-to-work bonuses to unemployment recipients who accept a job offer. Amazon, McDonald's and Chipotle are hiking wages, as is Tyson Foods, which will also start allowing more flexible work schedules.

And President Joe Biden is emphasizing the need for workers to accept new job offers even as the factors that have been keeping them on the sidelines — scarce childcare options, elevated health concerns and generous federal unemployment aid — remain in place.

“It’s time to get back to work,” Idaho Republican Gov. Brad Little said Tuesday while announcing that his state would be ending federal unemployment benefits. “We do not want people on unemployment. We want people working. A strong economy cannot exist without workers returning to a job.”

The flurry of activity underscores the rising concern that the economic recovery could be jeopardized even as lockdown restrictions are lifted if restaurants, travel companies and other businesses are unable to hire enough staff to keep up with surging consumer demand.

Fears of a labor shortage have been fed by government data that showed employers added 266,000 jobs in April, falling far short of the roughly 1 million that many economists had forecast.

While economists warn against jumping to conclusions based on one month of data, a second survey released Tuesday showed there were a record 8.1 million job openings available going into April. And there were fewer hires per job opening that month than at any time since the series began in 2001, said Jed Kolko, the chief economist at the job-search site Indeed. That’s fueling the suspicion that a shortage of workers is holding employers back.

The difficulty in hiring workers has prompted some of the country's largest employers to increase pay. McDonald's announced Thursday it would raise wages for more than 36,500 hourly workers by an average of 10 percent over the next several months. Amazon said it will hike wages by up to $3 an hour for more than half a million of its U.S. employees.

But the conversation over how to boost hiring has focused primarily on the enhanced unemployment benefits, which Republicans say are overly generous and give people an incentive to stay home.

The benefits currently supply an extra $300 per week in federal money on top of state jobless aid, which varies among states but averages more than $300 a week.

More states are expected to follow those that have cut off the federal benefits. And GOP lawmakers in Washington are pushing legislation to overhaul the federal aid: Nine Republicans this week introduced a bill to cut the benefits in half by the end of the month and phase them out entirely by the end of June. Sen. Ben Sasse (R-Neb.) is rolling out legislation that would convert the last two months of extra unemployment benefits into a signing bonus for any worker who gets a job by July 4.

“We’ve been warning about this predictable crisis for a year now,” Sasse said in a statement. “Americans want to work, but the federal government is paying more for unemployment than for work. Well-meaning but stupidly designed policy is holding Main Street back.”

Senate Democrats also signaled this week that they are unlikely to support extending the enhanced benefits beyond the program’s current September expiration date if the economy continues to recover.

At the same time, economists caution that the benefit of cutting off the extra jobless aid early would be limited and could hurt those who truly need it, while also forcing people into jobs that aren’t a good fit and don’t work out long-term. Mark Zandi, chief economist at Moody’s Analytics, said the motivating effect of ending the aid would only be “on the margin.”

“You're obviously hurting people who really need the UI, but you're only going to get a few people back to work,” Zandi said. “Net-net, I think it's a mistake.”

Andrew Stettner, a senior fellow at the left-leaning Century Foundation, said, “There is simply no economic evidence that pandemic unemployment aid is holding back job creation." Stettner highlighted weekly jobless claims data to show that more than 1 million workers have already gotten off unemployment rolls since early March — moves made before GOP governors began cutting off their federal benefits.

The Labor Department said Thursday that 473,000 people filed initial claims for jobless benefits in the week ending May 8, down 34,000 from the previous week and the lowest since the pandemic began.

While Biden administration officials and most economists acknowledge that the unemployment aid is probably one reason for the slow pace of hiring in April, they say a combination of lingering health concerns, lack of child care and workers being choosier about their job choices is also likely to blame.

“The biggest issue is that you’ve got several moms and dads that are home that had been working, but have to be home to take care of their kids,” said Zandi. “Certainly when schools reopen in person, these parents ought to be able to get back to work and really fill in a lot of these open positions.”

Other elements that could be contributing to slower rehires can be harder to track through official data: a heightened level of early retirements, for example, by baby boomers who quit their jobs at the start of the pandemic and aren’t planning to return. A huge number of people are also switching jobs and sometimes industries, and in those cases it can take longer for an employee to match with a new employer.

One in three people who said they were working in February 2020 are no longer with the same employer as they were then, according to Adam Blandin, an economist with Virginia Commonwealth University who co-created the Real-Time Population Survey.

“When there’s that amount of reallocation, that could be one more source that’s contributing to a little bit slower recovery,” Blandin said. “Because employers are looking for people who may have moved on, and people who are trying to move on are trying to figure out where to go next.”

The amalgamation of factors means that some of the steps being proposed to reverse the trend, like paying out a return-to-work bonus, will likely have little benefit if they only address one of the problems keeping people at home.

“If the issue is solely money, maybe a return to work bonus is going to help,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “If the issue is childcare, that a single mom simply cannot find a childcare facility, maybe schools are not open yet in a particular area ... In that case, a return-to-work bonus isn't going to have any impact.”

The White House is looking to take a multi-step approach to boost hiring, all while dismissing the idea that the enhanced unemployment benefits included as part of Biden’s American Rescue Plan are a major reason people are staying at home.

The bulk of the administration’s approach centers on doling out aid that was already allocated under the rescue plan, in part by setting up a process for state and local governments to apply for funding that could help boost public-sector hiring and sending relief checks to 16,000 restaurants and bars. The White House also released guidance this week to help states use rescue plan funds to aid childcare centers in reopening and give families subsidies to afford them.

On unemployment specifically, the administration is working to help states reimpose their work-search requirements for accepting unemployment benefits and highlighting programs already in place that would allow workers to take part-time job offers while continuing to collect some jobless aid. Biden himself also called on employers to help distribute vaccines and pay decent wages, saying both steps would help get people back to work.

And, in direct response to concerns that generous unemployment benefits are keeping Americans from returning to work, the administration is emphasizing a central rule surrounding the aid that is already on the books — that no one can turn down a reasonable job offer without losing their jobless aid.

“We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits,” Biden said at the White House on Monday. “That’s the law.”