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Leon Kaye headshot

Four Reasons Why the ‘Generous’ Unemployment Benefits Trope Isn’t True

By Leon Kaye
Unemployment Benefits

We keep hearing it from politicians and business leaders: There’s a worker shortage in part because of the temporary unemployment benefits that are paying people an extra $300 a week. As a result, more states are cutting off those funds in the coming weeks, if they have not done so already. The thinking goes that as those unemployment benefits dry up, people will be forced to work.

The truth is far more complicated than any assumption that people just want to stay home because it pays more.

Here’s what many businesses must confront: If they seek to hire again, such an effort will take some creativity on their part — that is, if starting by paying people a decent wage qualifies as “creative.” Paying a higher hourly wage is only the start: Compensation may need to include incentives, whether there’s a bonus pay structure or additional benefits such as childcare or reimbursement for transportation costs.

And some workers just want that an assurance of their safety, whether it’s from the virus itself or from the behavior of customers that made the social media wildfire rounds last summer.

By and large, we see four key reasons why it’s been hard for many businesses to hire employees. And it’s not that suddenly the world has been turned upside-down; the truth is that it has been that way for many wage earners, and they aren’t taking it anymore.

Someone has to do all that unpaid work

We’ve long known women have carried the burden of doing additional work around the home and for their families, even if they are working full time. Then the pandemic hit, and with it came the added the stress of ensuring kids could succeed at remote learning as schools shut down. The government may have sent out stimulus checks and additional unemployment insurance, but that doesn’t mean affordable childcare became an option, if it could even be found in the first place.

Given the odds that any kind of infrastructure bill with a “human infrastructure” component isn’t going to happen, companies may need to rethink how they recruit talent.

“Employers can also take measures to ensure that women who have left the workforce during the pandemic are offered opportunities to make up for lost time,” wrote Kweilin Ellingrud and Liz Hilton Segel for Forbes earlier this year. “More broadly, business leaders should reassess workplace norms to increase work-life flexibility for all employees.”

Many of the jobs out there aren’t paying squat, but that doesn't mean the preference is to sit from home

One state that will no longer accept federal funds for COVID-related unemployment benefits, Tennessee, runs its own job board for prospective employees. But as one local television station and some on social media have pointed out, only 8,500 or so of those jobs paid more than $20,000 a year. “That's $1,666 a month. Average rent in TN is $1,468 a month. That leaves you a full $6.60 a day to eat, assuming you don't spend on frivolous other expenses like say, oh, electricity,” was one response on Twitter.

Companies have had to respond in kind; note this Washington Post profile of the restaurant sector. Many eateries posted job openings once local economies began to emerge from the pandemic, but the response to such opportunities was often crickets. Once those wages were increased, and tactics such as finding ways for the kitchen staff to be tipped at some restaurants were put in place, the number of job applications, and rates of job retention, also rose.

In the end, paying a higher wage is hardly the worst tactic to adopt if that means a company can keep up with demand while also curbing costs from constantly having to hire new workers.

Government policies have ensured low-wage work is the norm, not the exception

The U.S. federal minimum wage of $7.25 an hour is among the lowest in Organization for Economic Co-operation and Development (OECD) nations: that’s a tad lower than Slovenia, Japan and Poland; a little more than Israel, Lithuania and Portugal. Among the industrialized nations that pay at least over $10 an hour are Australia, France, Germany and the U.K. “The federal government has set the country’s wage floor below its poverty line,” wrote Annie Lowrie for The Atlantic, “and has not increased the minimum wage to account for improvements in productivity and output over time.”

The feds’ role in neutralizing the clout of labor unions and the decline of benefits such as health insurance haven’t helped, either. And as it turns out, the U.S. actually has the largest percentage of low-wage work within OECD nations: about 25 percent. That is, almost a quarter of American workers earn less than two-thirds of the U.S. median wage; contrast that statistic with 5 percent in Belgium, 8 percent in Italy, 11 percent in Chile and 12 percent in Japan.

“The government has long encouraged low-wage jobs and forced people into them,” Lowrie concluded. “Uncle Sam is acting in the interests of low-wage employers, not the economy as a whole.”

As a result, it’s not that former workers are sitting on the sofa cashing in their unemployment checks: The situation is more complicated. Some may be holding out for higher pay, rather than taking the first job available. Others may have been accustomed to a certain wage before the pandemic and don’t want to take a step back. In the end, if more workers hold out for that higher-paying job, the result is better for the U.S. economy in the long run: A higher salary means more money gets spent on goods and services.

Didn’t we tell workers in early 2020 that many of their jobs weren’t coming back?

If so, many of them have undergone some sort of training, took online courses; heck, you can teach yourself new skills on YouTube and even TikTok.

One survey suggested workers followed such advice, and the number of workers who “up-skilled” during 2020 almost tripled compared to the previous year.

An example of where this sea change is underway is Nevada, largely dependent on its hospitality industry, one sector decimated as pandemic worries surged. “In response, workforce ecosystem stakeholders rallied to provide opportunities to dislocated workers,” wrote Nancy Brune for the Nevada Independent. “Many institutions of higher education, libraries, and platforms like Coursera launched new programs that allowed workers to return to the classroom to up-skill or explore a new career.”

As a result, Brune urges a rethink of that term “worker shortage,” describing it instead as a “worker renaissance,” a time at which many had the rug pulled out from under them, were told to figure it out, and then responded in kind.

Oddly enough, some data suggest that the same businesses that are complaining about their inability to find workers also benefitted from those same unemployment benefits. Some of this evidence is anecdotal — after all, many of us ordered take-out or delivery thanks to those stimulus checks.

But researchers at the University of Chicago concluded the same could be said of those COVID-driven unemployment benefits. People spent money on things they would not have otherwise been able to afford. The result: Benefit expansions could have resulted in as much as 2.6 percent more spending across the U.S. economy, while employment took at most a 0.4 percent hit.

Image credit: Tim Mossholder/Unsplash

Leon Kaye headshot

Leon Kaye has written for 3p since 2010 and become executive editor in 2018. His previous work includes writing for the Guardian as well as other online and print publications. In addition, he's worked in sales executive roles within technology and financial research companies, as well as for a public relations firm, for which he consulted with one of the globe’s leading sustainability initiatives. Currently living in Central California, he’s traveled to 70-plus countries and has lived and worked in South Korea, the United Arab Emirates and Uruguay.

Leon’s an alum of Fresno State, the University of Maryland, Baltimore County and the University of Southern California's Marshall Business School. He enjoys traveling abroad as well as exploring California’s Central Coast and the Sierra Nevadas.

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