As Arkansas and Missouri see a rise in COVID-19 cases, more economic protections are needed
Key takeaways:
- As the Delta variant of COVID-19 spreads throughout the United States, Arkansas and Missouri are facing an even more dramatic spike in COVID-19 cases, in part due to lower vaccination rates. This puts many at risk and may contribute to long-term economic problems in the region.
- To mitigate these effects, Missouri and Arkansas policymakers must take immediate action to strengthen public health and the economy, including:
- Expanding Medicaid and eliminating barriers to benefits.
- Recommitting to the federal expansion of unemployment benefits to cushion the economic harm as business disruptions grow.
- Enacting paid sick leave and paid family and medical leave.
As COVID-19 cases and hospitalizations begin to rise again across the country, some states are more vulnerable than others. Neighboring states Missouri and Arkansas are in the middle of a serious COVID-19 spike along with Louisiana, Florida, and Mississippi. The number of cases per capita in the two states—about 52 new cases daily per 100,000 residents in Arkansas and 40 per 100,000 residents in Missouri—is more than twice the national average of 19. The seven-day rolling average of deaths in the two states is rising rapidly and is three times the national average. Mercy Hospital in Springfield, Missouri, ran out of ventilators over the Fourth of July weekend. Hospitals across the state of Arkansas are already reaching maximum capacity—even as a record number of COVID-19 hospitalizations are anticipated in the coming weeks.
The minimum wage has lost 21% of its value since Congress last raised the wage
Saturday marks 12 years since the last federal minimum wage increase on July 24, 2009, the longest period in U.S. history without an increase. In the meantime, rising costs of living have diminished the purchasing power of a minimum wage paycheck. A worker paid the federal minimum of $7.25 today effectively earns 21% less than what their counterpart earned 12 years ago, after adjusting for inflation.
As a result of Congressional inaction, over two dozen states and several cities have raised their minimum wage, including 11 states and the District of Columbia that have adopted a $15 minimum wage. These higher wage standards have increased the earnings of low-wage workers, with women in minimum wage-raising states seeing the largest pay increases. In the rest of the country, however, states have punished low-wage workers by refusing to raise pay standards. As many as 26 states have gone so far as to pass laws prohibiting local governments from raising their minimum wage.
The farmworker wage gap continued in 2020: Farmworkers and H-2A workers earned very low wages during the pandemic, even compared with other low-wage workers
Key takeaways:
- More than two million farmworkers were deemed “essential” amid the pandemic in order to sustain food supply chains, but the latest wage data show that farmworkers were not rewarded adequately: They earned just $14.62 per hour on average in 2020, far less than even some of the lowest-paid workers in the U.S. labor force.
- At this wage rate, farmworkers earned just under 60% of what comparable workers outside of agriculture made in 2020—a wage gap that was virtually unchanged since the previous year. They also earned less than workers with the lowest levels of education.
- The wage paid to most farmworkers with H-2A visas—known as the Adverse Effect Wage Rate (AEWR)—was even lower, with a national average of $13.68 per hour. (The AEWR is based on a mandated wage standard that varies by region and is intended to prevent underpayment.) But many H-2A farmworkers earned far less in some of the biggest H-2A states. In Florida and Georgia—where a quarter of all H-2A jobs were located in 2020—H-2A workers were paid the lowest state AEWR, at $11.71 per hour.
- Farmworkers are employed in one of the most hazardous jobs in the entire U.S. labor market and suffer very high rates of wage and hour violations, and the majority of farmworkers who are unauthorized migrants or on H-2A visas are even worse off, with limited labor rights and heightened vulnerability to wage theft and other abuses due to their immigration status. Congress should take immediate action to improve labor standards for all farmworkers and provide migrant farmworkers with a path to citizenship.
Near the start of the pandemic in 2020, numerous work and travel restrictions were implemented in the United States to slow the spread of COVID-19. But for most workers, including farmworkers, options like remote work were either not permitted or not feasible. The more than two million farmworkers who grow, harvest, and pack the crops that end up on grocery store shelves were deemed “essential” and expected to work to keep food supply chains up and running.
Were those farmworkers ultimately rewarded and valued for their massive contributions to society? It appears not—the latest wage data show that farmworkers continued to earn far less than even some of the lowest-paid workers in the U.S. labor force, which suggests their important work continues to be undervalued. This post reviews the wages that farmworkers earned in 2020 relative to other comparable sets of workers.
Care workers are deeply undervalued and underpaid: Estimating fair and equitable wages in the care sectors
The Biden administration has made large investments in care work—both child care and elder care—key planks in its American Jobs Plan (AJP) and American Families Plan (AFP). These investments would be transformative, and a greater public role in providing this care work can make the U.S. economy fairer and more efficient. The administration has also recognized the need to pay workers in these sectors higher wages—which are sorely needed—but setting a fair wage standard for care workers presents unique challenges.
For a variety of systemic reasons, including racism, misogyny, and xenophobia, there has never been a set of institutions that has managed to carve out decent wages and working conditions in care work. For example, the average hourly wages for home health care and child care workers are $13.81 and $13.51, respectively, which is roughly half the average hourly wage for the workforce as a whole. So, unlike in sectors like construction, a “prevailing wage” standard would just cement the industrywide insufficient wages currently experienced in care work.
But just because it’s challenging doesn’t mean it’s impossible to establish strong wage standards in this sector. All wages in the U.S. economy are politically and socially determined, but given that care work is heavily publicly financed, care wages are especially determined by political decisions (via commission or omission). As a result, there is a strong administrative responsibility and opportunity to set equitable wages in this sector. This research memo outlines a number of ways to improve the wage standard for care workers and is a preview to a forthcoming, more comprehensive research report.
Policymakers cannot relegate another generation to underresourced K–12 education because of an economic recession
Key takeaways:
- Federal education funding and additional recovery funds targeted to education during recessions can help if they are sufficiently large and are sustained for long enough.
- During the Great Recession, federal funding and additional recovery funds targeted to public K–12 education through the American Recovery and Reinvestment Act provided an initial and critical counterbalance to the defunding brought about by the recession, but these funds were phased out far too prematurely.
- Nationally, total real revenue per student lagged behind the pre-recession level, on average, for eight school years after the onset of the last economic downturn.
- The reductions in total revenue per student were not uniform across districts: High-poverty districts and their students experienced the biggest shortfalls—and a very sluggish recovery.
As Congress debates the appropriate amount of investments needed to boost the economic recovery from the COVID-19-induced recession, we can learn a lot by carefully looking at the decisions made in the aftermath of the Great Recession of 2007–2009. One of the clearest lessons of that period is that spending by the federal government largely dictated the amount of economic suffering for those hit the hardest. When that spending falls short of what is needed, some groups never fully recover.
School finance deserves a place in this discussion. Federal support to education plays a critical role in filling recession-induced fiscal gaps that open at the state and local levels, and maintaining education funding during economic downturns contributes to a faster and fuller economic recovery. As we discuss in this post, if federal investments in public education had been larger, sustained as needed, and allocated in a way that channeled further assistance to districts serving larger shares of low-income students, they would have better assisted our students, schools, and communities in the aftermath of the Great Recession.
May Job Openings and Labor Turnover Survey shows job openings held steady and quits dropped
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Jobs and Labor Turnover Survey (JOLTS) for May. Read the full Twitter thread here.
The layoffs rate continued to trend downwards while the hires rate softened and the quits rate fell. It’s clear the monthly data exhibits some volatility, but the labor market over the last few months continues to move in the right direction.
2/n pic.twitter.com/NBeut1IAIp— Elise Gould (@eliselgould) July 7, 2021
June jobs report shows strong growth and the promise of recovery: Initial comments from EPI economists
EPI economists offer their initial insights on the June jobs report below. They see strong growth in employment, especially in leisure and hospitality—the numbers do not signal a big labor shortage. The economy appears to be on its way to a full recovery by the end of 2022.
From economist and director of EPI’s Program on Race, Ethnicity, and the Economy (@ValerieRWilson)
Read the full Twitter thread here.
The 850k jobs added in June reflects lifting of more COVID-19 restrictions in time for summer, no indication of labor shortage, and on pace to reach pre-COVID unemployment rate by end of 2022. 1/n
— Valerie R Wilson (@ValerieRWilson) July 2, 2021
Job and wage growth do not point to an economywide labor shortage
Highlights: Labor shortage
- The available data suggest that we’re seeing a relatively brisk adjustment to a large and positive economic demand shock, not an economywide labor shortage.
- In a measure of wage growth that controls for composition bias—the Atlanta Wage Growth Tracker—wage growth in the first 15 months following the COVID-19 economic shock has been comparable to the weak wage growth seen during the 2001 and 2008 recessions.
- Job growth by industry is very well predicted simply by the size of the jobs deficit that remained from the COVID shock—in fact, job growth in leisure and hospitality has been a bit higher than one would expect given the size of the COVID-19 hit to that industry.
Monthly job growth over the past three months has averaged 540,000, a pace that would see the economy hit pre-COVID measures of labor market health by the end of 2022. While recovery can’t come soon enough for U.S. workers, if we do hit this target of pre-COVID labor market health by the end of 2022 it will constitute a recovery that is roughly five times as fast as that following the last downturn (the Great Recession of 2008–2009, when reattaining pre-recession unemployment rates took a full decade).
Inflation—sources, consequences, and appropriate policy remedies
Several very good primers were recently written on how to think about inflation in the coming months. But as the reaction to monthly price inflation numbers that ever tick above a 2% annualized rate continues to be disproportionately angst-ridden, another one may be useful.
Assessing this week’s data and the ongoing debate about inflation and economic “overheating” requires an understanding of at least four key points:
- The source of inflationary pressure is crucial to assessing how policy should respond. Inflation coming from the labor market because workers are empowered enough to secure wage increases that run far ahead of the economy’s long-run capacity to deliver them (that is, productivity growth) is the only source of inflation that should ever spur a contractionary macroeconomic policy response (either smaller budget deficits or higher interest rates). This type of inflation is what worries about “overheating” center on.
- Other sources of inflationary pressure are far more likely to be transitory and hence should not spur a contractionary policy response.
- Inflation in the prices of commodities is often volatile and driven largely by global markets. Such price increases are likely to hinge on idiosyncratic drivers like weather changes, oil field discoveries, or rapid growth in large economies outside the United States. This kind of inflation should not spur a contractionary response. These price increases are not driven by economic “overheating”; engineering an economic “cooling” by reducing budget deficits or raising interest rates will not stop them—but it will cause a lot of collateral damage in slowing growth within the United States.
- Inflation driven by very large relative price changes is also highly likely to be transitory and should not be met with a contractionary macroeconomic policy response.
- Arguing that inflation stemming from many sources should not be met with a contractionary policy response does not mean that this type of inflation is good, or even just benign. Such inflation often does reduce typical workers’ living standards. But to be effective, anti-inflation policy must address such types of inflation with tailored measures, not across-the-board macroeconomic austerity.
- Spillovers of inflation that begin outside the labor market but spark inflation driven by wage-price spirals are highly unlikely given the extremely weak bargaining position and leverage of typical U.S. workers in recent decades. This degraded bargaining position also suggests that unemployment rates might reach far lower levels than they did in past decades before spurring wage growth sufficient to drive excess price inflation.
A real ‘party of the working class’ wouldn’t attack the Affordable Care Act
A number of high-profile Republicans in recent years have tried to claim that they have become the “party of the working class.” Nothing exposes this as false as clearly as the GOP’s unrelenting attacks on the Affordable Care Act (ACA)—legislation that was imperfect but still an enormously important advance in the U.S. welfare state.
The latest attack is another court case that made its way to the Supreme Court (California v. Texas)—which could have a ruling as soon as Thursday. Legal merits of the case aside (there were essentially none), the economic fallout of the case if it is decided in the plaintiffs’ favor would be profound, as the requested remedy is the abolition of the entire ACA.
The ACA was in some ways hugely complicated, but can be boiled down to five major undertakings:
- Strengthening employer-provided health insurance with mandates like no lifetime caps on benefits paid and an allowance for adults up to the age of 26 to be covered on parents’ plans;
- Providing needed regulation for the “nongroup” health insurance market (the market for people who can’t get insurance through their employer or through existing government programs);
- Providing subsidies to make purchasing nongroup plans more affordable for many;
- Paying for states to expand their Medicaid programs significantly; and
- Raising taxes on high incomes to pay for its spending provisions.
Job Openings and Labor Turnover Survey for April shows an economic recovery gaining steam
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Jobs and Labor Turnover Survey (JOLTS) for April. Read the full Twitter thread here.
Job openings increased most in accommodations and food services (+349,000) and hiring also increased in accommodation and food services (+232,000) a good indication that supply of workers was beginning to respond to demand in April.
2/— Elise Gould (@eliselgould) June 8, 2021
May jobs report is a promising sign that the recovery is on track: Initial comments from EPI economists
EPI economists offer their initial insights on the May jobs report below. While they see strong growth in employment, including in leisure and hospitality, the U.S. labor market is still facing a large jobs shortfall. Relief and recovery measures—including expanded unemployment benefits—should be sustained for workers and their families as the economy continues to recover.
From senior economist, Elise Gould (@eliselgould):
Read the full Twitter thread here.
+559k jobs in May is slightly better than the average growth of the prior 3 months. If this pace continues over the next year, we will likely get down to 4% unemployment by mid-2022 and will be fully recovered before the end of 2022, fully absorbing losses plus population growth.
— Elise Gould (@eliselgould) June 4, 2021
The labor market is down 7.6 million jobs since February 2020, but the total jobs shortfall should take into account pre-pandemic labor market trends or at least growth in the working age population. When those are included, the jobs shortfall is in the range of 8.6-10.7 million. pic.twitter.com/njpUX7KGPx
— Elise Gould (@eliselgould) June 4, 2021
What to watch on jobs day: Missing expectations for job growth isn’t worrisome—yet
Last month saw disappointing growth in payroll employment, with just 266,000 jobs added in April, when many expected a number well over 500,000 (and maybe even over a million). Ahead of tomorrow’s release of the jobs report for May, we want to put that headline number in perspective, particularly in how this relates to policy choices.
The Biden administration has clearly decided to go big on the amount of fiscal support they are going to provide the economy over the next year—passing the $1.8 trillion American Rescue Plan (ARP) on the heels of a $900 billion package passed in December. They are determined to not repeat the policy mistake that led directly to a lost decade of economic potential after the Great Recession in 2008-09, when the government provided too little fiscal support. It took 10 full years after the Great Recession just to regain the pre-2008 unemployment rate low point, and even when this unemployment rate low was regained in 2017, it was partly because labor force participation still remained depressed. All of this raises a couple of questions: Just how much faster can recovery be this time, and would another month as disappointing as April make this fast recovery impossible to attain?
We think one reasonable metric of success would be a full return to pre-COVID labor market conditions by the end of 2022. These pre-COVID conditions included an unemployment rate of 3.5% and a prime-age labor force participation rate of 82.9%. Restoring pre-COVID labor market health by the end of 2022 would require creating 504,000 jobs each month between May 2021 and December 2022. This average monthly jobs growth target starts from today’s 9.0 million “jobs gap” relative to February 2020, and includes the need to absorb growth in the working-age population over the next 20 months (this growth in the working-age population requires roughly 55,000 jobs per month on its own). Hitting this end-of-2022 goal would see the U.S. economy reach 4.0% unemployment by mid-2022.
What if it’s not a labor shortage, but just the return of tipping customers driving wage growth in restaurants?
One of the most widely discussed data points from last month’s jobs report was the rapid acceleration in wage growth for the leisure and hospitality (L&H) sector, particularly among production and nonsupervisory workers. This sector-specific wage acceleration (not seen in other sectors), combined with disappointing economywide job growth for the month, launched a huge debate about potential labor shortages. We wrote previously about why concerns over labor shortages were largely misplaced. Among other things, the rapid wage growth in L&H was accompanied by very fast sectoral job growth, so there was no evidence that any labor shortage was impinging on overall growth.
Further, this acceleration of wages in L&H might provide less evidence of even a sector-specific labor shortage than previously thought. When economists or other analysts express concerns about labor shortages, they generally mean a shortfall of potential employees that forces employers to gouge deeper into their profit margins to raise wages to attract workers. At some point this gouging will become unsustainable and so hiring will lag.
However, there is compelling evidence that the wage acceleration in L&H in recent months is not driven by employers raising base pay to attract workers, but instead by just an increase in tips stemming from restaurants filling back closer to pre-COVID capacity. Put another way, since December 2020, the rise in tip income, not an increase in base wages, can likely entirely explain the acceleration of wages for production and nonsupervisory workers in restaurants and bars. If this is the case, the wage acceleration will stop when restaurants get back to normal capacity. The evidence that the L&H wage acceleration is largely just a resurgence in tip income is as follows:
Only one in five workers are working from home due to COVID: Black and Hispanic workers are less likely to be able to telework
Key takeaways:
- At the beginning of the pandemic, we showed that not everybody can work from home, with the ability to telework differing enormously by race and ethnicity.
- As with the pre-pandemic period, there remains a large disparity between the share of Black and Hispanic workers who are able to telework during the pandemic, compared with white and Asian American and Pacific Islander (AAPI) workers.
- Specifically, only one in six Hispanic workers (15.2%) and one in five Black workers (20.4%) are able to telework due to COVID, compared with one in four white workers (25.9%) and two in five AAPI workers (39.2%).
- According to April monthly data, the disparity in teleworking across educational level still persists. About one in three workers with a bachelor’s degree or higher still teleworked as a result of COVID (33.8%), compared with about one in 20 workers with a high school degree or less (4.8%).
The COVID-19 pandemic has highlighted and exacerbated underlying disparities in the health and economic wellbeing of people across the country. Segregated cities and neighborhoods have devastated many—disproportionately Black and Hispanic communities—under the weight of the pandemic and the ensuing recession, while others have been less impacted. Some families have seen multiple family members and friends become seriously ill or lose their jobs, while others have come away relatively unscathed (and in some cases, prospered). Millions of workers have risked their health and the health of their families by going to work in-person, while others have been able to work from home and don’t regularly encounter those facing the pandemic’s wrath.
The bottom line: disparities persist between who can safely stay home and get a paycheck and who cannot.
President Biden’s budget shows what true ‘fiscal responsibility’ means: Pushing the economy closer to full employment, reducing inequality, and measuring the debt burden more accurately
The Biden administration released the president’s budget today—a proposal for tax and spending policies they would like to see become law over the next year. It includes substantial investments in traditional infrastructure, child care and early education, higher education, and elder care. It also calls for recurring cash payments to families with children. It includes money for more generous subsidies through the Affordable Care Act (ACA), substantial increases in Medicare and Medicaid coverage, and calls on Congress to undertake permanent reforms to modernize the nation’s fragmented and inadequate unemployment insurance system.
The proposal also calls on Congress to develop comprehensive legislation to strengthen and extend protections against the abusive practice of misclassifying employees as independent contractors and uses federal housing grants to incentivize inclusionary zoning practices to alleviate the nation’s housing shortage.
On the tax side, it raises taxes on realized capital gains and on corporate income, and it closes loopholes and tightens enforcement in an effort to raise revenue through greater tax compliance.
About 18 months ago, we at EPI released a blueprint for guiding fiscal policymakers. In this blueprint, we identified the main targets of fiscal policy as: ensuring high-pressure labor markets and low unemployment, reducing inequality, and then (and only then) reducing the economic obligations incurred by the public debt.
The Biden administration’s budget (particularly given the passage of the American Rescue Plan earlier this year) scores extremely high on these marks. Specifically:
Preliminary data show CEO pay jumped nearly 16% in 2020, while average worker compensation rose 1.8%
Data from large firms filing information on CEO compensation through the end of April show corporations and a strong stock market shielded CEOs from the financial impact of the pandemic.
An examination of the early filings of 281 large firms shows:
- The offer by CEOs to forgo salary increases during the pandemic was largely symbolic. Salaries were stable, but many CEOs pocketed a windfall by cashing in stock options and obtaining vested stock awards, compounding income inequalities laid bare during the past year.
- CEO compensation, including realized stock options and vested stock awards, rose 15.9% from 2019 to 2020 among early reporting firms. Growth in CEO compensation was slightly faster than last year’s strong growth—14.0% between 2018 and 2019—while the annual compensation of the average worker increased just 1.8% in 2020.
- Strong CEO compensation growth and modest growth in worker annual compensation yielded a remarkable growth in the CEO-to-worker compensation ratio, which jumped from 276.2 in 2019 to 307.3 in 2020 among early-reporting firms. In firms that retained the same CEO, the CEO-to-worker compensation ratio rose to 341.6 in 2020, up from 278.9 in 2019.
There is no justification for cutting federal unemployment benefits: The latest state jobs data show the economy has not fully recovered
Key takeaways:
- There are still nearly 10 million people actively looking for work and unable to find it. April state jobs and unemployment data released last Friday show that in many of the 24 states—led by Republican governors—that are cutting federal unemployment insurance (UI) programs, labor market conditions look similar to the national picture.
- The data likely understate the weakness of these labor markets, as labor force participation has fallen since the pre-pandemic level. And nearly all the states cutting UI still have significantly fewer jobs than before the pandemic.
- Those still filing for these benefits are the workers that need them the most, due to care responsibilities, health concerns, or other factors. Governors cutting off these key supports for these workers are not acting in the long-term best interest of any state’s workers or businesses.
Republican governors in 24 states—including Florida and Nebraska just this week—have indicated they will pull out from the federal unemployment insurance (UI) programs created at the start of the pandemic. Some states are ending participation in all federal pandemic UI programs, others only some of the federal supports. These actions are dangerously shortsighted.
UI provides a lifeline to workers unable to find suitable jobs, giving them time to find work that matches their skills and pays a decent wage. Moreover, the money provided through these entirely federally funded programs bolsters consumer demand and business activity in local economies, helping to speed the recovery. In many states, these federal UI programs are providing the bulk of all unemployment benefits to jobless workers. By cutting off these programs—which currently provide an extra $300 in weekly benefits, allow workers who have exhausted traditional UI to continue receiving benefits, and expand eligibility to workers typically not included in existing UI programs—governors are weakening their states’ potential economic growth.
Further, the most recent national jobs and unemployment data show that the country has not yet recovered from the COVID-19 recession. In April, the country was still down 8.2 million jobs from before the pandemic, and down between 9 and 11 million jobs since then if you factor in the jobs the economy should have added to keep up with growth in the working-age population over the past year.
New York included undocumented immigrants in pandemic aid, and 290,000 workers will benefit: Other states should replicate the program
Key takeaways:
- Congress and both recent presidential administrations excluded undocumented immigrants from key sources of pandemic aid: unemployment insurance and stimulus checks.
- In April, New York became the first state in the nation to give undocumented immigrants aid that approaches what others got in unemployment insurance, benefiting an estimated 92,000 people. And New York will give undocumented workers who don’t qualify for the higher level of compensation what others got in stimulus payments, benefitting an additional 199,000 people.
- It hurts all of us if any of us are left out of programs intended to get us through the recession and through a health care crisis. New York’s program could readily be replicated in other states.
This April, New York committed an unprecedented $2.1 billion of the state budget to make up for the exclusion of undocumented immigrants from federal aid during the COVID-19 pandemic.
Over a year ago, the pandemic hit New York early and brutally hard. Hospitals were full, and there were heart-wrenching backlogs in burying the dead as its limit. It quickly became clear that immigrants and people of color were disproportionately among those falling sick and dying. At the same time, the notion of “essential workers” took hold, and New Yorkers applauded the people keeping life going for the rest of us, knowing that many were immigrants, including large numbers who were undocumented. The unemployment rate spiked to 16% and was even higher for people of color and immigrants.
Yet, the first round of desperately needed federal aid very specifically excluded many immigrants. Future rounds of aid under both the Trump and Biden administrations continued to exclude undocumented individuals from expanded unemployment insurance and stimulus checks.
Illinois extended unemployment benefits to school workers in the summer, and Minnesota should follow suit
For over a decade, EPI has documented the significant pay penalty that teachers in our country’s K–12 schools suffer as a result of woeful underinvestment in public education. But it is not just teachers who have been underappreciated: Many other school staff who are essential for providing high-quality, safe, and nurturing learning environments face considerable financial challenges as a result of their decision to serve in public schools. Paraprofessionals, classroom assistants, administrative assistants, custodians, food service workers, bus drivers, and other nonlicensed staff in schools typically receive low pay and inadequate hours during the school year, and no employment from school districts over the summer months—meaning a potential loss of 10 or 11 weeks of paid employment.
In 2020, Illinois took an important step toward fixing this last issue, by making nonlicensed school staff eligible for unemployment insurance during the summer months. Illinois’s experience offers guidance for other states considering similar programs, as in Minnesota where a similar measure is currently under debate. We’ll discuss the Illinois experience later on, but first it’s useful to understand a little more about who nonlicensed school staff are and the pay they receive.
Restaurant labor shortages show little sign of going economywide: Policymakers must not rein in stimulus or unemployment benefits
Recent economic data suggest labor shortages in leisure and hospitality have popped up—but there is little reason to worry about spillover into the rest of the economy and no reason to change policy course.
Yes, last week’s jobs report was disappointing, with employment growth slowing significantly from the months before. It would be a mistake, however, to make too much of a single month’s data—the monthly jobs report data are notoriously volatile, and there are still excellent reasons to believe that coming months will see very strong job gains. Further, as disappointing as last week’s report was, there is nothing in it that demands a reorientation of the general policy stance taken by the federal government. The relief and recovery aid already passed (including the boosts to unemployment insurance) should be continued, and proposed packages (like the American Families Plan and the American Jobs Plan) should be passed.
The argument that last week’s report demands a rethink of today’s policy orientation rests on claims that it contained clear evidence of damaging labor shortages induced by either too-extensive stimulus or too-generous unemployment insurance (UI).
There is not compelling evidence of either of these. In fact, nothing in last week’s jobs report calls for a wholesale change of policy course from the federal government. The key takeaways from the data are:
Job openings surged in March as the economy continues to recover from the pandemic
Today’s Job Openings and Labor Turnover Survey (JOLTS) reports an all-time high number of job openings, surging to 8.1 million for the end of March. This is a positive sign that the economy is moving forward. While hires were little changed, I’m optimistic that in coming months those job openings will translate into filled jobs.
One important indicator from today’s report is the job seekers ratio—the ratio of unemployed workers (averaged for mid-March and mid-April) to job openings (at the end of March). On average, there were 9.8 million unemployed workers compared with 8.1 million job openings. This translates into a job seekers ratio of 1.2 unemployed workers to every job opening. Put another way, for every 12 workers who were officially counted as unemployed, there were only available jobs for 10 of them. That means, no matter what they did, there were no jobs for 1.6 million unemployed workers.
As with job losses, workers in certain industries are facing a steeper uphill battle. In the construction industry as well as arts, entertainment, and recreation, there were more than two unemployed workers per job opening. In educational services, accommodation and food services, other services, and transportation and utilities, there were more than three unemployed workers for every two job openings.
Unemployment and job openings by industry (in thousands), August 2021
| Industry | Unemployment, three-month average | Job openings, three-month average | Ratio |
|---|---|---|---|
| Mining | 69.3 | 36.7 | 1.9 |
| Construction | 590.0 | 362.0 | 1.6 |
| Educational services | 307.7 | 202.3 | 1.5 |
| Arts, entertainment, and recreation | 228.0 | 221.0 | 1.0 |
| Transportation and utilities | 501.0 | 516.0 | 1.0 |
| Information | 141.7 | 164.7 | 0.9 |
| Retail trade | 1060.3 | 1265.7 | 0.8 |
| Government | 782.0 | 1027.7 | 0.8 |
| Durable goods manufacturing | 399.0 | 526.7 | 0.8 |
| Finance and Insurance | 222.7 | 297.7 | 0.7 |
| Other services | 329.3 | 477.0 | 0.7 |
| Accommodation and food services | 1080.3 | 1628.7 | 0.7 |
| Real estate and rental and leasing | 96.0 | 157.0 | 0.6 |
| Nondurable goods manufacturing | 248.3 | 407.7 | 0.6 |
| Wholesale trade | 161.3 | 280.3 | 0.6 |
| Professional and business services | 885.0 | 1820.0 | 0.5 |
| Health care and social assistance | 754.0 | 1611.0 | 0.5 |
Notes: Unemployment levels represent the average of the unemployment level for the current month and the subsequent month in the Current Population Survey to better line up with the job openings data from the Job Openings and Labor Turnover Survey. Both unemployment data and job openings data are then averaged over three months to smooth for better data reliability. These data are non-seasonally adjusted so caution is warranted when making comparisons across time.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey.
There has been much bemoaning of labor shortages, particularly within accommodations and food services, even though there are no available jobs for one-third of the job seekers in that sector. Any potential shortage from the recent surge in job openings is likely to be quite short-lived, as before long many more workers will come back into job-search as it becomes increasingly safe to pursue these public facing jobs with improving public health metrics, as childcare and schooling becomes more reliable, and as wages rise to compensate for the extra risk of working in face-to-face places during the lingering pandemic. And, as we saw in the April employment data last Friday, the labor market added 241,400 more jobs in accommodation and food services, so the trend is already moving in the right direction.
It’s also important to remember that all potential workers don’t show up in the official count of unemployed, particularly in this recession as workers sheltered at home to avoid the pandemic or to care for family members. The economic pain remains widespread with 22.1 million workers hurt by the coronavirus downturn. I hope hiring picks up in coming months since the labor market continued to face a significant jobs shortfall likely in the range of 9.0 to 11.0 million jobs.
This Mother’s Day, recognize care work as the work that powers our economy
Mother’s Day is, at its core, about care. When we select Hallmark cards and order flower deliveries, we’re honoring the care provided by moms and other maternal figures. This Mother’s Day, though, marks more than a year into a pandemic that threw the disparities in our care system into stark relief. Women left the workforce in staggering numbers to attend to COVID-related caregiving responsibilities at home. This was disruptive for individual families and the economy at large.
So this year, while of course we should celebrate our mothers, there’s much more to be done. Honoring our caregivers goes beyond individual gestures; it calls for a sweeping investment in care workers and services.
Care isn’t a burden for women and families to shoulder alone. It’s the foundation of our economy, and it deserves to be treated as such. For the tens of millions of workers with care responsibilities related to, for example, young children or elderly parents, having stable, high-quality care services available is what makes it possible for them to hold a job. Put simply, care services are needed for the functioning of our modern labor market.
Workers with care responsibilities need a strong care system in place in order to participate in the workforce. As it stands, our care infrastructure is fragmented and inadequate, which cuts off opportunities for millions of workers. The burdens of our inadequate care infrastructure disproportionately fall on women, who still perform the bulk of care work in this country. Those care burdens are a primary cause of low labor force participation among prime age women in the U.S. relative to our peer countries around the world, even before the pandemic. Poor care infrastructure comes at great economic costs.
While a disappointing jobs report, job gains in leisure and hospitality respond to increased demand in April
A disappointing 266,000 jobs were added in April, and March’s employment number was revised down by 78,000. While the overall growth was far below expectations, leisure and hospitality gained 331,000 jobs, a sign that increased demand has led to significant gains in employment in that sector.
The unemployment rate ticked up in April to 6.1%, in large part due to workers beginning to return to the labor force in search of jobs. The labor force increased by 430,000 workers in April, the largest gain in six months. Likely in response to improving public health metrics and increased expectations of job opportunities, more and more workers are actively returning to the labor force in search of work. While wage growth will be the leading indicator of employers having to bid up wages to attract workers, the significant rise in the labor force runs counter to anecdotal claims of labor shortages.
As of the latest data, employment is still down 8.2 million jobs from its pre-pandemic level in February 2020. But, if we include the likelihood that thousands of jobs would have been added each month over the last year without the pandemic recession, the jobs shortfall is more likely in the range of 9.0 and 11.0 million. Now is not the time to turn off vital relief—including expanded unemployment benefits—to workers and their families.
What to watch on jobs day: An improving labor market, but rising long-term unemployment and a significant jobs shortfall are still causes for concern
When the April jobs report comes out tomorrow from the Bureau of Labor Statistics, I expect another month of strong job growth. Progress on the production and distribution of the vaccine, as well as forthcoming aid to state and local governments and direct assistance to workers and their families, means that the labor market should pick up steam. And that’s much needed, because the U.S. economy is still facing a significant jobs shortfall between 9.1 million and 11.0 million jobs, as I show below.
As of the latest March 2021 data, employment is down 8.4 million jobs from its pre-pandemic level in February 2020. In addition, thousands of jobs would have been added each month over the last year without the pandemic recession.
I consider two plausible counterfactuals for how many jobs may have been created if the recession hadn’t hit, as shown in the figure below. First, we could simply add enough jobs to keep up with population growth. There was a noticeable slowdown in ages 16+ population growth early in the pandemic; however, on average, we still would have needed a minimum of 54,000 jobs a month just to keep up with that growth.
Alternatively, we could count how many jobs may have been added if we took pre-recession growth in payroll employment and extended that forward. Average monthly job growth over the 12 months prior the recession was 202,000. Using these reasonable counterfactuals, we are now short between 9.1 million and 11.0 million jobs since February 2020. When the latest job numbers are released tomorrow, we should not only look at the difference in jobs between now and February 2020, but also what could have been if the economy continued growing over the last year.
When corporations deceive and cheat workers, consumer laws should be used to protect workers
A janitorial company lures low-wage, immigrant workers to become “franchisees,” offering the promise of small business ownership and steady income. An online food delivery company provides a place on the app for customers to tip workers. A training program for jobseekers promises a position at the end of the costly course.
But in reality, the franchisees can barely survive, the company keeps the tips, the training is bogus, and the promised job is nonexistent.
Some public enforcement agencies (and even private lawyers) have recently attacked corporate misconduct of this sort by enforcing laws traditionally used to protect consumers in order to address unfair and deceptive labor market practices that target working people, often immigrants and people of color. More enforcement agencies and lawyers should follow their lead. Public enforcement agencies that focus on enforcing consumer protections, including federal agencies, attorneys general, and state and local consumer offices, should take an expansive view of their mission, and take action to protect worker-consumers in their often-complex relations with large corporations that use abusive and predatory practices.
A few recent cases provide examples of how this can be done.