Marc Cuniberti: Unemployment and a shortage of workers
There seems to be a lot of help wanted signs around town. It seems a bit odd that there would be a plethora of help wanted signs with the official unemployment rate sitting at 6%.
Albeit down from a March 2020 high of 14%, unemployment is still off its normal lows of around 4%. No surprise to anyone that there are many people out of work due to COVID-19. It is argued that the increased unemployment benefits may be dulling incentive for some to get back to work. Several media outlets have touched on the subject, and the debate rages on as to whether the lucrative unemployment bonus payments are keeping people from looking for work.
Talking with a handful of business owners in the last few months seems to confirm a tight labor market exists and workers are less than plentiful.
A March 2021 article by Bill Connerly, “The Labor Market is tight despite High Unemployment,” details the plight of various business owners that cannot meet the demand of consumers as the economy opens up and patrons flood back into retail establishments.
Official statistics from the Bureau of Labor Statistics peg the unemployment rate at 6.3% which is far from full employment. Federal Reserve Chairman Jerome Powell recently stated the real unemployment rate is closer to 10%. No doubt the statistics are grim. Millions of people lost their jobs during the pandemic with the bulk of layoffs in March and April of 2020.
With weekly bonuses for unemployment benefits initially set at $600, the minimum monthly payments to anyone successfully applying would likely be well north of $3,000. Many workers receiving such benefits made more money staying home than they made working.
A Yale University study on the effects of unemployment payments on incentive found little correlation between the increased payments and incentive. From a July 2020 article from CNBC’s Makeit website stated “The Yale research showed that low wage workers and workers from states where unemployment benefits are lower” — so those for whom the $600 supplement increased their total unemployment benefits by a bigger percentage — “did not experience larger declines in employment when the benefits expansion went into effect.”
Although the $600 weekly bonus payments ended July 31, the new weekly bonus is still $300 over what normally would be paid.
Whatever the reason for the shortage of workers, the job market remains tight despite the unusually high unemployment rates.
The question on how to get people back to work spurned another novel idea by Senate Republicans in July of 2020. Pay a different kind of bonus for people to get back to work, calling it a “Back to work bonus.” Although the proposal never really got off the ground, the idea was put forth by Senator Rob Portman (R-OH). The program would provide a temporary $450 weekly payment on top of the weekly paycheck for those returning to work. The idea recently resurfaced in several media outlets last week. Many are calling the weekly unemployment bonuses excessive, and the idea of another payment to go back to work “ridiculous.” This analyst asks the question that in lieu of paying even more to get people back to work, wouldn’t it make more sense (a be cheaper) to just stop paying the high bonuses that are possibly causing the problem?
The COVID-19 event continues to challenge us. With millions suffering from economic hardship, that the labor market remains tight is indeed perplexing. Many claim the payments are excessively high and are the reason many are not returning to work. Others believe every penny of monetary assistance was necessary, with some arguing even more help is needed.
Whether there could have been a better way will likely never be known. One thing is certain however, the amount of debt the U.S. government is amassing to pay for it all is off the charts.
The views expressed herein are those of the author, Marc Cuniberti, and may not reflect those of this media outlet, its staff, members or underwriters. His website is http://www.moneymanagementradio.com. Mr. Cuniberti holds California Insurance License #0L342449 and is a Medicare approved agent in California. 530-559-1214.
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The MEME stocks are on fire again. You remember these. My last article on the MEMEs was the called “The Game that is Gamestop.”