Debunking the “No One Wants to Work” COVID Unemployment Narrative
I’ve seen the same narrative play out online several times a week for the past year now. Someone shares a post or a news article about how businesses are struggling to fill open positions. The comment sections fill with responses like “no one wants to work anymore” and “time to end the unemployment bonuses.” Well, those benefits ended this month, but will that be the silver bullet to get everyone back to work?
Let’s set two things straight first:
- COVID is still a major issue in the United States. We have 3–4x the number of infections than we did this time last year. The vaccine has fortunately changed the severity of a lot of those cases, but COVID is real and still here.
- Some people who made more money collecting unemployment with the COVID bonuses than they made working. How many people are is hard to say, but ultimately we’re talking about making $700 a week instead of $600 a week. It’s not making anybody rich.
There are currently an estimated 10 million job openings in the US, yet we still have a higher than the pre-COVID unemployment rate. It is a far more complex issue than simply attributing it to the additional COVID-19 unemployment benefits.
Current Unemployment
In recent history, the US unemployment rate has hovered around 4%, which is considered “full employment.” It dipped down to around 3.5% between September 2019 and February 2020 — the lowest rate in over a decade. This makes the current 6% unemployment rate look like we still have a long way to go in recovery.
However, if we take a long view of the unemployment rate in the US going back to the 2008 recession, we start to see a much different picture. In the wake of the recession, unemployment peaked at around 10% and it took six years to return to the pre-recession rate of 5%. Now let’s hope it doesn’t take six years for our economy to fully recover this time, but we’ve already made great strides in bringing the unemployment rate down from 14.8% to 5.2%
There are more qualified people to talk about this topic and the macroeconomic impacts, but at a high level, it’s important to understand what the unemployment rate and market looked like pre-COVID.
- CNBC (Feb 2020): It’s Never Been This Hard for Companies to Find Qualified Workers
- NYT (Jan 2020): The Nursing Shortage Is Threatening Our Care
- Bloomberg (July 2019): U.S. Truck Driver Shortage Is On Course to Double in a Decade
- Restaurant Business (Nov 2019): With Unemployment Low, Restaurants Struggle to Fill Jobs
It was hard for companies in nearly every industry to find workers in 2019 and 2020, so it shouldn’t be surprising that it is still the case now. With the unemployment rate hovering a point above the pre-pandemic rate, there aren’t exactly tens of millions of people sitting at home collecting COVID bonus unemployment.
Other Factors Impacting Unemployment
1. Child Care
Child care remains one of the biggest factors preventing people from returning to work, though there are several facets to it. In a June US Census Household Pulse Survey, 7.6 million Americans said the main reason they are unemployed is because they have to care for a child not in school or daycare.
Throughout 2020, childcare was severely limited, and if available at all, incredibly expensive. Childcare centers were struggling with guidelines on how to operate, which limited how many children they could care for while having increased costs for cleaning/hygiene products and a reduced labor force.
By mid-2021 most of these restrictions have been eased and vaccines are available to anyone 12+ at no cost. Schools have gone back to in person learning with masks. But childcare centers are still drastically understaffed, facing the same labor shortages that every other business is, but with the added challenge of finding people qualified to take care of children.
There is now the looming threat of variants in children on the horizon. For the past few weeks, 25% of new cases reported have been in children and many states aren’t more than a few weeks into the school year. For parents or caregivers, can they commit to returning to work when classes may go remote at any moment, temporarily for exposure quarantining but possibly longer?
2. Industry Changes
In Massachusetts, 17 new Amazon facilities have been built across the state since the pandemic started. Each of these employs at least 1,000 workers, but some distribution centers can employ closer to 3,000. This means if they’re fully staffed, up to 50,000 workers alone could have been taken out of the employment pool by Amazon alone.
Even within the foodservice industry, there have been some major changes in consumer trends over the past decade that have stretched the available workforce thin.
“Fast-casual” restaurants have carved out their own niche in the market and have boomed over the past decade. Places like Chipotle and Five Guys fall somewhere between fast food and full dine-in service, offering quick service of higher quality food. These chains didn’t pop up overnight, many have been around since the 90s and early 2000s, but they have seen explosive growth coming out of the 2008 recession. People were looking for high-quality food at an affordable price, and this business model fits the bill. For example, Chipotle had only 1,000 locations in 2010 and has nearly tripled that to 2,788 locations since. These are meager numbers compared to McDonald’s or Subway, but Chipotle employs nearly 100,000 people with no signs of slowing down any time soon. And they’re not the only example, there have been dozens of these chains that have had a massive expansion in the past decade and they often offer better pay and benefits than fast food or sole-proprietor restaurants can.
Breweries have been another sub-set of the service industry that have had massive growth since 2010. Throughout the 90s and early 2000s, the number of breweries/brewpubs was fairly stable at 1,500 locations. As of 2020, the US was approaching 9,000 breweries. Now, not every brewery is open to or serves the public, but many of them do. Many even prepare and serve their own food. This cannibalizes workers from other areas of the foodservice industry.
And for the breweries that do not serve their own food, many of them bring in outside food vendors. This is another area of the foodservice industry that seems to be increasing. I say “seems” because there are not a lot of hard numbers on this. Many are small businesses with few if any employees or they’re a separate revenue stream for an existing restaurant. According to IBISWorld, the number of food trucks alone has increased nearly fourfold between 2001 and 2021. Between 2019 and 2021 alone, there was a 20% increase in food trucks, while the restaurant industry as a whole was facing a rise in closures due to COVID.
It would be amiss to not mention ghost kitchens and delivery apps, which are possibly the latest change in the industry that got supercharged by COVID quarantines. The concept of ghost kitchens is only a few years old and food delivery revenue nearly doubled in 2020 alone. There are a lot of ethical questions in how delivery app companies treat their drivers, but many people are drawn to that work since you can make your own schedule. To work in a restaurant requires committing to a schedule, which can be hard for caregivers who are unable to find or afford other care, but the option to work for a delivery app company and work just an hour or two at a time could be appealing.
3. Seasonality & Immigration
Staffing was particularly challenging for tourist destinations this summer, as a lot of these seasonal jobs are taken by international workers. Restaurants and hotels in these locations rely on people coming from other countries on temporary J1 or H2B visas to work for the summer. Former President Trump had implemented a ban on non-agricultural workers under those visas, which did not expire until April which did not leave nearly enough time for applicants to go through the visa process for the start of the season in May. All of this was exacerbated by immigration delays at understaffed American embassies and other travel restrictions.
4. Retirement Rate
So you finish high school — maybe even college — and you get to enter the “workforce” for the next forty years or so. But after your forty years are up, you get to retire! In fact, millions of people retire from the workforce every year. At the end of 2019, there were a reported 25.4 million retirees. By the end of 2020, there were a reported 28.6 million retirees which is an increase of 3.2 million from the year prior.
That’s about a million people more than the average over the past few years. It may not seem substantial given the total number of people in the workforce, but to circle back to the claim that there are 10 million open jobs, these retirees could account for up to 10% of those jobs.
What’s Happened in States that Ended Unemployment Bonuses Early?
Maybe one of the best ways to debunk this is to look at the states who have already stopped administering the extra unemployment benefits to see how their employment rate has changed. Twenty-five states ended the program early, between June 12th and July 10th.
As of July, the twelve states that ended benefits early saw the same rate of hiring growth as states that didn’t (11.6% vs 11.2%). All of these states have Republican governors who have attributed the tight labor market to unemployment benefits. Granted that’s only one data point after a short period. So fast forward to August, and per a report from the Labor Department, the now two dozen states that ended unemployment bonuses early are still hiring people back at the same rate as states that maintained the program — actually a little less. Even worse, in the 19 states that they had the data for, only 145,000 out of the 1.1 million people on unemployment (13%) had managed to find a job since ceasing to collect benefits.
At this point, the federal program has ended and unemployed individuals are no longer going to receive an extra $300 a month, but it would be optimistic to think this will be a silver bullet to the problem. There are many differences between the economies in these states, so the view that unemployment bonuses were keeping people home is an over-simplistic explanation. Factors like child care, industry changes, retirement, and immigration all play into filling jobs and the unemployment rate.
