Why aren’t people going back to work? Blame both corporate and public policies

Have you seen the ever-increasing number of help-wanted signs lately? The closed drive-thru lanes, abbreviated hours, overworked wait staff and slow service? Especially here in the Sunbelt, demand seems to be growing much faster than the workforce. The apparent “labor shortage” is making headlines, and – as expected – people disagree about why businesses can’t find employees. Many conservatives blame government unemployment assistance, while many liberals blame inadequate wages and working conditions. It’s probably a combination of both factors, and not listening to what each side has to say isn’t helping anyone. 

Here in Florida, it’s very perplexing, as we see thousands of people arriving in the area every week, but somehow help wanted signs still stand. Everyone halted at the sight of the April jobs report, where we saw 266,000 jobs versus the expected million, and the labor force participation rate is still below pre-pandemic numbers. And voices abound, with commentators and thought leaders contributing to these overly simplistic explanations of why people aren’t going back to work.

Many conservatives immediately point the finger at unemployment benefits. Plain and simple, they say, these dollars are discouraging people from returning to work. As you remember, during the pandemic, the federal government added $600 more per week to state benefits. In many parts of the country, people were making much more from unemployment than their former jobs. As the recovery has taken root, federal unemployment assistance has been halved. Today, the unemployed get $300 a week in extra aid or around $700 a week in total benefits in places like New York. Still, even at present levels, it’s a better deal than many paid gigs, especially in low-wage sectors.

That doesn’t mean that unemployment assistance is inherently wrong. Unemployment assistance is needed to help families navigate this increasingly complex economic environment. Sometimes, we all need these benefits to be a temporary safety net after losing a job, which most of us have or will experience during our lives.

But lately, we have seen many people claiming something that lacks common sense: that unemployment benefits do not affect the labor market at all, according to an often-cited Yale study from last year. These concepts are simple: In many cases, unemployment benefits pay greater than prevailing wages in low-wage industries. Therefore, unless these folks’ benefits end, they will probably make the economically rational choice to stick with their unemployment benefits. The National Bureau of Economic Research found that a 10 percent increase in unemployment benefits caused a 3.6 percent decline in applications. This information doesn’t make the recipients good or bad people; it is just reality.

Next, we must mention the mainstream conclusion among many liberals — who blame the hesitancy to work on low wages. This conclusion is rooted in factual statistical analysis. We cannot ignore that wages have not kept up with inflation in the United States. Few jobs nationwide are sufficient to cover rent, health care, education and many other essential items. Therefore, a solid statistical case can be made that these companies are not paying workers enough to entice them back from their homes and back to work. And this is especially apparent in food service and other low-wage industries. According to economists at Bank of America, anyone who previously made less than $32,000 per year is better off financially in the near-term receiving unemployment benefits.

But can we ignore the fact that the government won’t be able to sustain this system forever? The Biden administration is pleading with people to re-enter the workforce. “We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment,” President Biden said this week.

Public policy is often messy, and running corporate America is not straightforward either. This labor shortage is nobody’s fault, but focusing on profit-only or help-only excludes common sense. And aiming to dismiss an opposing force won’t solve the problem, as these problems require multifaceted solutions. But we can’t have big companies mystified about why they can’t attract workers; they’re not paying enough. And we can’t be mystified about why millions of people are still staying home; they’re collecting unemployment. Is that good or bad? It is what it is.

David Grasso is the host of the Follow the Profit Podcast, where he shares simple ideas for financial success and lessons learned the hard way. He is also the CEO of Bold TV, Inc, a non-profit media company dedicated to entrepreneurship and cultural empowerment. Hannah Buczek is the managing editor and journalist for Bold TV. She also reports and edits for GenBiz, a non-profit media brand focused on promoting financial freedom.