How to Get the Unemployed Back to Work

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Concern that something is holding back U.S. workers from taking jobs along with anecdotes from employers having trouble hiring has accelerated a trend among state governors to end federal enhancements to jobless benefits this month — three months earlier than Congress intended. The goal is to get people off government benefits and back to work. It’s doubtful this policy change alone will be enough to meet employers’ hiring needs.

Some 7.6 million fewer people were employed in April than February 2020. But even with about 130 million Americans fully vaccinated, the number of workers is unlikely to rise rapidly. Government data show that only 1.4 million are on temporary layoff, down from the almost 17 million in the early months of the pandemic last year and a small fraction of the missing workers. The “low-hanging fruit” of easily recalling laid-off workers is basically gone.

How to Get the Unemployed Back to Work

Unlike past recessions, millions abruptly left the workforce as soon as the pandemic began and are still not seeking employment. Moreover, in the 24 states poised to cut jobless benefits early, people who left the labor market since February 2020 represent almost 44% of the 1.2 million missing workers. Cutting off jobless benefits to the unemployed is unlikely to get people back who do not want to work and are not currently receiving benefits. And six of those states, including Texas, have unemployment rates above 5%.

So what would get people back to work as safely and as soon as possible? Small businesses, state governments and Congress all have a role to play. The best, most lasting solutions are ones that address the problems in the labor market that we had well before Covid-19 showed up.  

First, small-business owners could make it easier for people to go back to work by helping workers access the vaccine by, for example, giving them paid time off to get vaccinated or hosting on-site clinics. According to the Census Bureau, 10% of non-retirees said in early May that being sick with Covid-19 or a fear of getting sick is why they were not working. Although some say businesses that are having trouble hiring should raise wages, that option may not be possible for many business owners, especially those who suffered through a year of historically low revenues.

Another way to make jobs more competitive is to make them more appealing to workers. Before the pandemic, 1 in 5 workers with a high school degree or less had jobs with unpredictable hours. Such schedules are particularly common in retail and restaurants — the source of many complaints about hiring. Not being able to control one’s hours or make future plans is even harder during a pandemic, with greater family care responsibilities and transit systems running at reduced capacity. Hours with short notice are especially difficult. A nontrivial percentage of low-wage workers have less than three days’ notice on when to show up at work, some of whom are on call. Employers committing to predictable hours and predictable paychecks would help many workers. 

How to Get the Unemployed Back to Work

Second, state governments could end practices that made hiring hard even before the pandemic. For example, occupational licensing has expanded over the past several decades and now covers almost 3 in 10 workers, including those with less formal education, such as manicurists, barbers and athletic trainers. Morris Kleiner, a professor at the University of Minnesota, argues that many of these licensing requirements raise costs to consumers without improving service. They also reduce the supply of potential hires. Cutting unemployment benefits may push people to find a job but it does not fix the burdensome requirements to hire workers.

Finally, Congress should pass President Joe Biden’s proposals to support people who work in schools, as well as care for our elderly and young children. There are currently a half million fewer state and local government employees in education, including bus drivers, school nurses and cafeteria workers, than before the pandemic. Schools that are fully open will be fully staffed. In addition, opening schools would allow parents, especially mothers of school-age children, who left the labor market last year to get back to work.

Jason Furman, a top Obama administration economist, and others argued in a paper a couple of weeks ago that opening schools would not address labor shortages, and that other factors, such as enhanced jobless benefits, explain weak job gains. But Misty Heggeness, a senior adviser at the Census Bureau, and others estimate that more than 1.4 million fewer mothers are working now than before the pandemic. Regardless, better support for caregiving would likely increase labor force participation. Countries with universal child care have a greater percentage of women in the workforce than the U.S.

Efforts to boost employment must work toward two goals: supporting people through a crisis that was no fault of their own and getting everyone back to work as quickly as possible. As a country, we have an opportunity to achieve a stronger, more equitable labor market than before the pandemic.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Claudia Sahm is a Senior Fellow at the Jain Family Institute and a former Federal Reserve economist. She is the creator of the Sahm rule, a recession indicator.

©2021 Bloomberg L.P.

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