Employment Effect of Eliminating COVID-19 Related Expanded Unemployment Benefits
By Philip Cornell
In mid-2021 several states stopped paying the additional unemployment benefits spurred by COVID-19. These benefits were provided by the federal government but paid by each state at its discretion.(1)(2) The additional benefits were created in order to ease the economic disadvantages of some workers resulting from the COVID-19 pandemic. Some states eliminated the benefits, as certain legislators from those states said that increased benefits were discouraging workers from seeking employment.
Certainly, the view that the extra COVID-19 payments discouraged work was not universal. Some policymakers believed that work for the unemployed simply did not exist, in some cases because of the pandemic itself. Others argued that that the extra COVID-related payments could actually encourage work by providing seed money to start new businesses more appropriate for a pandemic economy.(3)
My research suggests that the effect of eliminating COVID-related unemployment benefits may in fact increase workers seeking employment, but the effect of the reduction is dependent upon the state’s underlying COVID policies.
In October 2021, the YMCA in San Antonio, Texas, said 200 children were waitlisted at a childcare center because of hiring problems, despite raising the hourly wage of workers to $12.50 from $10. Ann Arbor and Portland also faced similar staffing shortages; preschool childcare was operating at 88% of its pre-pandemic capacity. The problem can only partly be attributed to the pandemic. Rather, staff quitting and lack of available staff to replace them is the principal impediment to these centers returning to full capacity.
This reality shouldn’t be surprising: The benefits and pay for many childcare workers are unattractive. But the pay reality for childcare workers is far grimmer than Bureau of Labor Statistics (BLS) data portrays.
Fears of inflation mean some are encouraging the Federal Reserve to act. Federal Reserve Chairman Jerome Powell acknowledged this when he said during a November 3 press briefing: “Policymakers will be watching employment levels, labor force participation, wages and quit rates, among other indicators, to make a judgment on the labor market.”
The Ludwig Institute for Shared Economic Prosperity (LISEP) has studied the metrics with which the Federal Reserve and other policymakers use to view the labor market, revealing problems with the status quo. This article explains those problems and proposes a new metric policymakers can look to in order to more accurately assesses the economy.
Why Are We Surprised that Hospitality Workers Are Moving to Other Sectors?
By Diana Dayoub
Hospitality and leisure workers made headlines recently seeking higher pay and better work conditions in other sectors. Companies in these industries reacted by offering astounding increases in pay to lure workers back into these jobs, with the hourly rate averaging $18.7 for the period of June-September of this year, a record high for the industry and an increase of 10.7% from March 2020. It remains to be seen whether this financial incentive will work, but I argue that businesses in the hospitality and leisure sector ought to consider more than just pay if they wish to keep their employees.
The Healthcare Con: How Health Insurers Are Hijacking Workers’ Wage Gains
By Philip Cornell
American workers typically receive health insurance from their employer, a system that has been ingrained in our society since WWII. But this concept is outdated, and there are two significant reasons why the system needs to change.
First, employer-provided healthcare has allowed, if not facilitated, an exorbitant increase in health insurance costs, without a commensurate increase in benefits or better healthcare outcomes. No doubt, this is in part because the principal buyer of the good is not the receiver of the good. Thus, the real costs are somewhat obscured from the end consumer.
Second, dual earning American households lose out on savings When family healthcare is selected by one member of a dual-income household, the business of the other earner saves money, but the savings are not passed on to the household.
Ultimately, we believe employers should not pay healthcare companies. Instead, they should give this money directly to their employees to buy their own healthcare. The reasons for this proposed shift are explained in detail in this article.
Over the last few months, we’ve seen a lot of news about low-wage workers demanding pay increases. Putting aside that the minimum wage hasn’t been raised in more than a decade, many economic pundits say that to cover increased wages, businesses will raise prices. If price increases are widespread, then the purchasing power of the worker doesn’t change. Workers will demand another wage increase, prices will rise again, and we will have fallen into what economists deem a “wage-price spiral.”
At the Ludwig Institute for Shared Economic Prosperity (LISEP), we have taken a close look at corporate profits versus employee wages over the last 20 years. Our analysis shows that wage increases need not spark inflation. Corporate profits and cash reserves mean that industry can and should pay their workers more. Here’s a closer look at what we’ve found.
As we look to post-pandemic America, it’s important that job quality is as much a public policy priority as quantity. Recent past history tells us this is not always the case. To some degree, that’s understandable because the economic indicator we rely on to explain worker wages gives us a distorted view of how they are really doing.
Following the Great Recession, the conversation was largely about quantity of jobs. In February 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA).(1) The $831 billion bill outlined job creation and economic recovery objectives through a plethora of channels including extending tax credits to those impacted by the recession, investments in transportation and environmental protection, among others. One of the key provisions was to get people off the unemployment payroll. The Office of the President declared ARRA a success, citing substantially positive quarterly growth in real GDP and payroll employment.(2)