Nearly every downturn, there comes a point when employers increasingly claim they can’t find the workers they need to ensure their business runs. Employers’ stories then get amplified in the media and policy discussions to such a level that it obscures the facts of what is really happening in the labor market.
We find ourselves in such a moment today, more than a year after the global pandemic and with still a long way to go to replace all the jobs that were lost.
And while there may be some places and instances where labor shortages are present, this is not the core issue driving the challenges with our economic recovery. Nor is it something that should be linked to policies, like Unemployment Insurance, that are helping workers stay connected to the labor market and engaged in the economy as consumers.
Here are four key reasons that the claims being made around labor shortages should not be a widespread concern or drive policy decisions. Instead, North Carolina policymakers should be focused on keeping workers in the labor force and making sure the quality of jobs that they return to are family sustaining and safe.
- Wages are not accelerating
As Heidi Shierholz, economist with Economic Policy Institute, wrote in a recent piece:
A key indicator that labor shortages are a core dynamic in the economy is the acceleration of wage growth. This is because as employers seek to hire from a smaller labor pool, they need to raise the wage offered in order to get people to come work at their business.
And yet in the aggregate nationally, there is no indication that wages are accelerating. Jerome Powell, Federal Reserve Bank chairman, has noted:
“We don’t see wages moving up yet. And presumably we would see that in a really tight labor market.”
In North Carolina, there are limits to looking at wage data because it is primarily available as an average measure — masking important differences in experiences of employment and wage outcomes by income groups in what we know from many sources is a recovery that has not reached low-wage workers yet. The data also doesn’t give us a picture of trends through 2021. However, a look at the year over year change in average weekly wage shows North Carolina’s 2019 growth in wages of 3.8% is in line with the national average, just as its 2020 year–over–year change remained similarly aligned with the national average at 7%. The North Carolina trend is following the nation and middle of the pack for the top 10 most populous states. However, a look at the year over year change shows North Carolina’s average weekly wage following a similar pattern of consistent but not exponential growth.
It will be useful to see if employers work to address their hiring challenges by raising wages in the coming weeks and months. Some employers have already demonstrated that raising wages works.
2. There are far more unemployed workers than there are job openings in the labor market
The national data on job openings per jobless workers finds that there are 40% more jobless workers than there are job openings. In some industries, there are even fewer job openings available for those who want to work.
North Carolina data on job openings suggests a modest growth in the number of job openings. Since January 2020, job openings have increased by 4.3% in North Carolina compared to 20.3% nationally.
3. More people are looking for work than before COVID-19
The reality is more people are trying to find a job today than before COVID-19. In 98 of North Carolina’s 100 counties, more people were looking for work in March of 2021 than before COVID-19. Statewide, some 75,500 more people were looking for work in March 2021 than before COVID-19, an increase of 41%.
These workers seeking employment belie the claims that there are labor shortages, as does the movement to employment that continues to happen. Interestingly, while more than half of the jobs lost at the start of the pandemic returned by August 2020 when the $600/week boost to Unemployment Insurance was allowed to expire, the recovery has proceeded at a much slower pace since then. Over the past six months, North Carolina has added fewer than 15,000 jobs, on average, per month.
4. Researchers have found Unemployment Insurance is not driving employment decisions
The reality is that people want to go back to work, but too few jobs, as well as unique factors like child care responsibilities and persistent health risks, make returning to jobs for many not possible. Research from economists at the Federal Reserve Bank of St. Louis suggests that the workers whose prior wages were low place an even higher value?on re-employment even in the face of more generous Unemployment Insurance benefits.
A strong state Unemployment Insurance system — alongside investments in things like our state’s child care system — are critical to stabilizing the economy, keeping people in the labor force, and breaking down the barriers that remain for people looking to return to work.
This summer, when debate over the $600/week federal supplement boost reached its peak, there was much discussion — and rejection — of whether Unemployment Insurance was keeping workers from returning to jobs. Economist Arindrajit Dube, from the University of Massachusetts, analyzed the issue by looking at the ways in which the loss of the $600/week reduced wage replacements by different levels across the country (NC was hit hard due to our low state weekly benefits) and found no effect on employment by higher Unemployment Insurance payments. Additional research by others had similar findings, including that Unemployment Insurance benefits under the CARES Act had no effect on employment as the expansion began and businesses opened, but also that states with more generous Unemployment Insurance payments experienced faster recoveries.
5. Policies can support better employment outcomes for workers and employers
The reality is that getting people back to work requires action. Employers have to be willing to raise wages to attract workers, and policymakers have to stay engaged in supporting workers so that barriers to employment are removed.
Unemployment Insurance is a key tool that helps the labor market recover by stabilizing consumer spending at businesses, keeping people engaged and looking for work, and minimizing the potential for a job loss to push people into deep hardship.
The unprecedented nature of job losses in the past year, as well as the current trajectory of unequal job gains for those with high and low wages, make policy choices critical in this moment. Addressing the problems with our state Unemployment Insurance so that jobless workers don’t lose support before they find work is the foundation by which North Carolina can prioritize getting people back to work. Addressing workplace safety and child–care concerns is also critical.
Without a policy agenda that values workers and supports jobless workers, a just recovery will be further delayed.