Three weeks ago, when looking at the unprecedented labor shortage that is crippling the US economy (even with some 100 million Americans not in the labor force) we said that there is a simple reason for this paradoxical phenomenon: 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 from Bloomberg:
- 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 it’s 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. “We’re 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. “There 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.
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 – there’s still plenty of slack in the labor market.
Only… if one goes by the complete lack of workers, there isn’t.
This was confirmed by the results of the latest, April, NFIB Small Business survey, which found that a record 42% of companies reported job openings that could not be filled.
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 NFIB 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.
Illinois-based Portillo’s Hot Dogs LLC boosted hourly wages in markets including Arizona, Michigan and Florida, and is offering $250 hiring bonuses. The chain has hired social-media influencers and built a van called the “beef bus” to help recruit. Still, many of the chain’s 63 restaurants remain understaffed, said Jodi Roeske, Portillo’s vice president of talent.
“We are absolutely struggling to get people to even show up for interviews,” Ms. Roeske said.
To be sure, it’s not just entry level places that can’t find workers: full-service and high-end restaurants like Wolfgang Puck’s Spago Beverly Hills, where servers can earn $100,000 a year with tips, also are struggling to recruit workers. Puck said in an interview with the WSJ that expanded unemployment benefits and new options like personal chef gigs are contributing to staffing shortages at Spago and his other restaurants.
“I don’t think we should pay people to stay home and not work if there are jobs available,” he said.
Summarizing the data, Rabobank’s Michael Every wrote that Biden’s generous 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.”
Well if it is unemployment benefits that is causing the labor shortage why not do away with said benefits?
Of course, that is far easier said than done: once Americans are used to collecting money for doing nothing, they would be extremely displeased – to put it mildly – once the money is gone. This is not lost on politicians who know that they would be the immediate target of popular ire.
And yet, one state is taking the much needed, if extremely unpopular step, of breaking this addition to stimmy handouts which has also led to this historic labor shortage.
According to Yahoo, Montana plans to stop some of its federally-funded unemployment benefits to address “the state’s severe workforce shortage,” according to its labor department, which will leave many out-of-work residents without any support at all.
“Nearly every sector in our economy faces a labor shortage,” Governor Greg Gianforte, a Republican, said in a statement on Tuesday, echoing what we said last month, namely that “The vast expansion of federal unemployment benefits is now doing more harm than good.”
Instead, the state will do the correct thing and begin offering return-to-work bonuses to help employers looking to hire.
Starting June 27, Montanans will lose access to the extra $300 in weekly unemployment benefits but maintain their regular benefits. Contractors, gig workers, and others will also lose access to the Pandemic Unemployment Assistance (PUA) program, meaning those workers won’t get any benefits.
Those relying on the DOL’s Pandemic Emergency Unemployment Compensation (PEUC) program, which gives additional weeks of unemployment benefits to workers, will stop receiving benefits. The state also plans to reinstate the requirement that stipulates workers must be actively searching for a job to qualify for unemployment benefits.
Predictably, the decision sparked howls of outrage from those already habituated to Biden’s Universal Basic Income regime:
“Montana’s move to end these fully federally-funded UI programs, along with their COVID-19 exceptions, is cruel, ill-informed, and disproportionately harms Black and Indigenous People of Color and women,” Alexa Tapia, unemployment insurance campaign coordinator at the National Employment Law Project, told Yahoo Money, basically slamming the decision as both racist and sexist. “Ending these programs would leave 22,459 people unable to support their families and hurt thousands more.”
Alternatively, those 22,459 people can find a job.
Montana’s unemployment rate was 3.8% in March, down from its 11.9% pandemic peak in April 2020, according to data by the Labor Department.
The federally-funded unemployment programs run through September 6 nationwide. Montana’s cancellation would cost workers at least $3,000 per worker in supplement benefits if they couldn’t find work through the program expiration. Workers on PUA and PEUC would lose at least $4,500 in benefits because they no longer will be eligible for the base unemployment benefit.
Liberal economists were also outrage, claiming that Universal Basic Income is a wonderful creation (it hasn’t worked out that great in any socialist nation where it has become a staple of social welfare, but whatever), with studies from such liberal bastions as the National Bureau of Economic Research all the way to Yale University claiming that the extra $600 in benefits distributed earlier in the pandemic had limited labor supply effects and likely didn’t disincentivize work. (narrator: they disincentivize work, just see Wolfgang Puck’s quote above).
“The 100% federally-paid unemployment benefits have boosted spending and contributed to the strong economic recovery,” Andrew Stettner, an unemployment insurance expert and senior fellow at the Century Foundation, told Yahoo Money. “It’s shortsighted for the state to sacrifice that economic stimulus based on the anecdotal labor shortages concerns of a few employers, especially given the limited evidence of work disincentives from unemployment pay during the pandemic.”
What he forgot to mention is that the artificial spending created by stimulus has led to soaring prices and out of control “transitory” inflation, which will lower the standard of living for everyone, not just those on the government’s dole, but again anything that goes contrary to the liberal mantra of “bigger government is always better” is anathema and must be crushed immediately.
So far, Montana is the first and only state to fully opt out of the federal unemployment benefit programs enacted in the pandemic and currently extended by the American Rescue Plan signed into law in March. As a way to incentivize workers to return to work, the state is offering a one-time return-to-work payment of $1,200, using money from the American Rescue Plan to fund the program. Only those who complete four weeks of work would receive the payment.
“Incentives matter,” Gianforte said. “Our return-to-work bonus and the return to pre-pandemic unemployment programs will help get more Montanans back to work.”
One can only hope that more states follow Gianforte’s extremely unpopular, if extremely prudent decision, before the US is mired in 1970s style hyperinflation.