Article 43

 

Monday, April 19, 2021

What Unemployment Insurance Tells Us About Work During A Pandemic

image: enough of red/blue politics

What Unemployment Insurance Tells Us About Work During A Pandemic

By Samuel Cai
NPR
March 30, 2021

Editor’s note: This is an excerpt of Planet Money’s newsletter. You can SIGN UP HERE.

One of the most expensive provisions in President Biden’s COVID-19 relief plan involves giving unemployed workers an added $300 per week, through September 6th, on top of their existing state unemployment insurance benefits. While the House version of the bill called for $400 per week, this was revised down to $300 in the Senate proposal, due to a last minute push supported by moderate Democratic Senator Joe Manchin. Senator Manchin ARGUED that an extra $400 per week was too much, and could stifle people’s motivation to find jobs. “We want people to get back to work,” he said. “We’re going to have a hard time getting people ready to go back in and keep the economy going.” Seems like basic economics: if you make nearly as much money as you do working, then why would you work?

Every state in the nation requires individuals to seek and accept available work in order to claim unemployment benefits. Still, assuming unemployed people can choose whether to work or not, economic logic tells us that each dollar increase in unemployment benefits reduces the incentive to work, by making the alternative, not working, slightly more appealing. Finding the right unemployment benefit levels can be a tricky balancing act for politicians: they want to provide as much of a social safety net as possible, but they also want to encourage people to get back to work as soon as they can. A NEW WORKING PAPER from Professor Arindrajit Dube of the University of Massachusetts at Amherst, however, suggests that policymakers need not worry: higher unemployment benefits don’t seem to affect employment levels the way many economists assumed.

Last March, President Trump’s CARES Act stimulus package began providing a $600 per week federal bonus in unemployment benefits. The bonus affected people differently depending on which state they lived in, based on income levels in the state, and the generosity of state unemployment benefits. For example, the median unemployed person in Louisiana received benefits worth 143 percent of their previous income because of the federal bonus, compared to 39 percent without the bonus. The median unemployed person in Hawaii also had their unemployment benefits boosted to a similar level 149 percent of their previous income ח but even without the bonus, they were already receiving benefits worth 62 percent of their previous income.

The federal bonus from the CARES Act eventually expired, and by mid-September of last year, states returned to their pre-pandemic levels of benefits. For the next few months, Dube compared how employment levels varied across states using data collected by the U.S. Census Bureau. He concluded that states with low unemployment insurance benefits (and thus the strongest incentives for returning to work) did not increase employment levels more than states with high levels of unemployment insurance benefits. In fact, just the opposite: high unemployment benefits led to slightly higher employment levels.

So policymakers can breathe easy, then: raise the unemployment benefits, and watch the employment numbers rise!

Well, there are a few caveats. While Dube did find that high unemployment benefits led to slightly higher employment levels, the rise was so slight as to be statistically insignificant. The results, therefore, don’t rule out the possibility that high unemployment benefits may in fact have led to lower employment levels. Dube pointed out, however, that his results do suggest that any decrease in employment would be relatively small; smaller than most estimates from prior research on the topic.

Dube also noted that the period he studied was a deep economic downturn and had unique health restrictions. It’s unclear, therefore, whether the results he found would hold up even during the later periods of the pandemic. Biden’s relief plan addresses a time period with economic and public health conditions markedly different than those of the CARES Act. Those conditions could change how people weigh the value of unemployment insurance benefits against the value of working, so economists can’t fully predict how labor markets will behave during the rest of the pandemic and recovery process. While no one can be certain which policies will lead to the most streamlined recovery, Dube’s work suggests that at least in some cases - providing more support to unemployed workers may not be the delicate balancing act policymakers once thought it was.

SOURCE

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“Biden’s Trillions” Spark Historic Labor Shortage: Record 42% Of Businesses Can’t Fill Job Openings

By Tyler Durden
ZeroHedge
April 15, 2021

Last week we made a remarkable observation: despite some 100 million Americans not in the labor force (of which 94 million do not want a job)..

image: not in labor force 4/2021

... there is now a full-blown labor shortage in the US, for one simple reason - trillions in Biden stimulus are now incentivizing potential workers not to seek gainful employment, but to sit back and collect the next stimmy check for doing absolutely nothing in what is becoming the world’s greatest “under the radar” experiment in Universal Basic Income.

Consider the following striking anecdotes:

· Early in the Covid-19 pandemic, Melissa Anderson laid off all three full-time employees of her jewelry-making company, Silver Chest Creations in Burkesville, Ky. She tried to rehire one of them in September and another in January as business recovered, but they refused to come back, she says. They’re not looking for work.

· Sierra Pacific Industries, which manufactures doors, windows, and millwork, is so desperate to fill openings that itԒs offering hiring bonuses of up to $1,500 at its factories in California, Washington, and Wisconsin. In rural Northern California, the Red Bluff Job Training Center is trying to lure young people with extra-large pizzas in the hope that some who stop by can be persuaded to fill out a job application. WeӒre trying to get inside their head and help them find employment. Businesses would be so eager to train them, says Kathy Garcia, the business services and marketing manager. ԓThere are absolutely no job seekers.”

Even more amazing: a stunning 91% of small businesses surveyed by the NFIB said they had few or no qualified applicants for job openings in the past three months, tied for the third highest since that question was added to the NFIB survey in 1993.

One of our favorite labor market metrics, the so-called “take this job and shove it” indicator- or the “Quits” rate from the JOLTS survey - is the latest confirmation of how empowered workers feel: in March the number of people quitting jobs hit 2.3% of overall employment in January, just a tenth of a percentage point below the record going back to 2001.

But what is most striking is the context on these figures: recall that just one year ago, the unemployment rate was a depression-era 14.8%. And while it has since dropped to 6%, it remains well above the 3.5% rate of February 2020, before the pandemic. So judging from the jobless rate - which the Federal Reserve tracks closely - theres still plenty of slack in the labor market.

Fast forward to this week when we got the results of the latest, April, NFIB Small Business survey.

First the good news: small business optimism index rose 2.4 points in March to 98.2, its first return to average levels since last November.

Next the not so good news: business uncertainty increased too about whether it is a good time to make capital expenditures. But the kicker: 42% reported job openings that could not be filled, a record high.

image: nfig small business hard to fill jobs 4/2021

The key quote from NFIB Chief Economist Bill Dunkelberg was Main Street is doing better as state and local restrictions are eased, but finding qualified labour is a critical issue for small businesses nationwide.” And the explicit admission that BIden’s “trillions” in stimulus are behind this predicament:

“Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force.”

As if it wasn’t clear, the NFIC added that “finding eligible workers to fill open positions will become increasingly difficult for small business owners.”

Seven percent of owners cited labor costs as their top business problem and 24% said that labor quality was their top business problem. Finding eligible workers to fill open positions will become increasingly difficult for small business owners.

And for those readers quick to bash potential employers for being stingy and not simply raising wages to find qualified employees, a net 28% of owners reported raising compensation (up three points) and the highest level in the past 12 months, while another 17% plan to raise compensation in the next three months. Still, with the labor shortage well ahead of wage hike plans..

image: small business compensation 4/2021

... one things is clear: profits margins - if only for small businesses - are about to collapse, making the big megacorporations winners once again.

As for wages, while owners are still kicking and screaming, the Universal Basic Income so generously doled out by the government has reset the minimum practical wage so high that companies will have no choice but to hike compensation, the Fed just may get the benign, “non-transitory” inflation it has been so desperately seeking for so long… at least as long as the government continues to print welfare checks for some 18 million Americans.

image: collecting unemployment benefits 4/2021

Summarizing the data, Rabobank’s Michael Every writes “so unemployment benefits are ironically helping to push up wages, at least temporarily - which I am sure nobody intended, but underlines just how radical policy has to get in the US to make it happen.”

His conclusion: ‘’the problem is that small businesses trying to get past Covid are least well placed to lead this socio-economic charge; and if this points to a wage-price spiral - which is still unlikely - then the bond market will soon be pointing its finger at the Fed.”

SOURCE

Posted by Elvis on 04/19/21 •
Section Dying America • Section Next Recession, Next Depression
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