As more Minnesotans are vaccinated against COVID-19, features of a post-pandemic world are emerging: faces without masks, hugs – and “Now Hiring” signs on storefronts and businesses. It seems like everyone is hiring, from restaurants to big box stores to bars, and many are struggling to find enough workers to fill their vacancies.
At the same time, there are still a lot of people out of work. And workers who are unemployed receive an additional $ 300 per week as part of the US federal bailout passed earlier this year.
Many people – experts, employers, politicians – are sure that these extra unemployment benefits are a problem, causing workers to stay at home instead of looking for work. In fact, 25 states, including Montana, Florida, Arizona and Ohio, are ending the weekly supplemental benefit early in an attempt to push unemployed people into work.
But is a $ 300 increase in weekly benefits really enough to prevent the unemployed from taking a job?
Unemployment in Minnesota reached 4.1% in April – just a little higher than the low unemployment rate before the pandemic and the lowest since the pandemic started in March 2020.
It sounds like good news, but the real picture of the workforce is a little less rosy. The standard unemployment rate only measures the percentage of people who are unemployed and looking for work. This does not include people who are unemployed and have stopped looking for work. And the data suggests that for some reason there are a lot of people in this boat.
As of the start of 2020, Minnesota’s labor force participation rate, or the percentage of people 16 and over who are either working or actively looking for work, rose from 70.2% to 67.7%, the lowest since June 1978, when far fewer women were in the labor force. If you compare this drop to the size of Minnesota’s population aged 16 and over, that means about 112,000 fewer people in the workforce compared to just over a year ago – a comparable loss in size to the population of Rochester, Minnesota.
Throughout the pandemic, a historically high number of people were unemployed. Because of the crisis this posed to the economy, the federal government added additional unemployment benefits to the usual amounts people were eligible for.
Under the federal CARES law, passed last year, unemployed people received an additional $ 600 per week from the start of the pandemic until July. By decree of former President Donald Trump in August, unemployed people received an additional $ 300 per week from the federal government. As part of the US bailout, the additional $ 300 per week has been extended until September 6.
Minnesota’s unemployment system pays people half of their old weekly wages, up to $ 740. With the additional payment of $ 300, the maximum an unemployed person in Minnesota would earn is $ 1,040, or $ 26 an hour for a 40-hour work week. But DEED commissioner Steve Grove said the vast majority of unemployed people earn much less than that.
Is this enough to keep Minnesotans out of the workforce?
“Businesses certainly think so,” said Ron Wirtz, director of regional outreach at the Federal Reserve Bank of Minneapolis, in an interview last week. “We do a lot of surveys and we started asking them what they thought of the reasons why labor availability is restricted, and that tended to be the main thing they mentioned – just that unemployment insurance benefits are very generous, and that is what keeps people from working.
Frictions in the labor market
In fact, it is difficult to determine the effect of additional unemployment benefits, as there are many other factors currently causing friction between workers and jobs, Wirtz said.
One, Wirtz said, is that many workers are still concerned about contracting or spreading COVID-19. While more than 50% of Minnesotans have been vaccinated against COVID-19, many people, including young children, are yet to be vaccinated.
“The fear of COVID is always present, especially for multigenerational households,” he said, citing surveys. Although this share is probably decreasing, it is not nonexistent.
Another is the mismatch between the jobs available and the jobs workers want or are qualified for. Employment counselors interviewed by the Minneapolis Fed and the Department of Employment and Economic Development found that a significant number of job seekers were looking for telecommuting options.
“There are a lot of people who are fired and didn’t have that option, and think, ‘I think I would like that option,'” Wirtz said.
Others may not be qualified for jobs that offer many opportunities: the construction industry, for example.
“We have a lot of front desk workers who are not working right now. They can’t easily go into construction very well, even though there are tons of openings in the construction, ”Wirtz said.
DEED’s Grove pointed out that Minnesota had a labor shortage before the pandemic, and now the job market is different from what it was before.
Another factor is the issue of family care.
Some daycares have operated at lower capacity, and others have operated intermittently due to COVID-19 cases, which can make it much more difficult for parents with children to return to the workforce if they are absent .
Julia Pollak, labor economist at ZipRecruiter, a company that connects job seekers with employers, said some parents with the option to stay at home might not see the point in returning to work now, with kids at school for a short time before being home during the summer vacation starting soon. Once the children return to full-time in September, there may be a return to the workforce.
Combined, all of these issues paint a complicated picture of the Minnesota and nation’s labor market as the pandemic subsides.
“It sounds easy: if you’re unemployed and there are a lot of jobs, well, just go get a job,” Wirtz said. “I think the pandemic has shown that life is complicated and that it gets more complicated as you dig into the different households and the different obstacles they might face to easily relate to work.”
Wirtz said there is no doubt that rising unemployment has eased some of that friction for people, allowing them to reassess their employment status in some cases, but it is difficult to determine to what extent it is. of that extra money or the problems workers face getting back. tell.
“It’s safe to say that improved unemployment benefits are affecting some workers. How much, I think that’s a very important question that I don’t think we know the answer to, ”Wirtz said. “I think I’m pretty sure I’m saying it’s probably more than those who claim it has no effect. And I think it’s probably less than those who believe pandemic-era unemployment [is] the only reason people aren’t working now.
While some say it’s the weekly $ 300 unemployment benefits that keep workers at home, others say companies just aren’t paying workers enough to make the work worth it.
This can be a problem, but it’s not accurate to say that’s the only reason employers struggle to find workers, Pollak said.
The labor shortage has increased pressure on wages at many employers – Target, WalMart and other big chains among them. The number of unemployed Minnesotans is decreasing from week to week. And some workers are drawn to higher wages – and many of them aren’t people who were unemployed in the first place, Pollak said. Nationally, for example, adolescent employment is higher today than it was before the pandemic as young people seek employment, suggesting that adolescents are drawn into the labor market by higher wages.
A natural experience
Soon it might be easier to tell how big an impact the extra $ 300 per week has been. The additional benefits of the American Rescue Plan go until September 6 of this year, but at least 25 states end it sooner, creating a sort of natural experiment where researchers could see if more people are returning to work in states where the benefits have ended.
Pollak said economists would work to determine the effects of ending the $ 300 per week benefit versus some of the other differences in states that end earlier.
But for now, Pollak said any easy answer ignores the complexity of the job market.
“I think the two things that are definitely wrong: the idea that unemployment benefits have no effect and the idea that they are entirely responsible are two extremes and completely wrong,” she said. market is complicated – that job seekers are complex, they have many, many different motivations, ”she said.