- People are returning to work en masse while labor shortages run rampant, people are saying.
- Julia Pollak, a labor economist for ZipRecruiter, broke down three things left out of this discussion.
- Jobless Americans aren’t all the same, neither are states, and disruption isn’t talked about enough.
- See more stories on Insider’s business page.
Somehow, two things are true simultaneously about the labor shortage afflicting the reopening American economy.
Many people are going back to work because their federal unemployment benefits were cut off early – but many also aren’t rushing back regardless.
There’s been a multitude of explanations for this contradiction, ranging from enhanced unemployment benefits to lack of childcare to systemically low wages. Julia Pollak, a labor economist for ZipRecruiter, one of the Internet’s biggest jobs sites, wrote in a Twitter thread on June 28 that The New York Times and Wall Street Journal had drawn “opposite conclusions” about this dynamic in articles published the same weekend.
-Julia Pollak (@juliaonjobs) June 28, 2021
She spoke to Insider about what’s being left out of the discussion, and said there’s one important thing to keep in mind: “A pandemic is not a normal recession. It is a massive labor supply shock, in addition to being a labor demand shock for a whole host of reasons. It is pretty much one of the most costly, disruptive things that can happen to an economy.”
She broke down three important nuances that should be better understood around benefits ending early:
(1) There’s no one type of jobless American
“I think what we often hear is we’re paying people more to stay home and not work, and that sounds kind of like a moral statement about job seekers,” Pollak said.
Pollak noted that a significant amount of Americans were neither working nor in school during times without enhanced unemployment benefits, which could imply the increased benefits aren’t a sole motivator.
That also holds true in the other direction: “There were lots of people as well who choose to work and hold multiple jobs, even if they would qualify for disability benefits or for other kinds of benefits.”
(2) Labor market disruption is underrated
Pollak said disruption from the pandemic is a crucial – and oft overlooked – aspect of the current situation.
“I think one piece of the puzzle that’s also just missing is that, while many people are discussing COVID-related barriers to returning to work and childcare, and the extra unemployment benefits, too few people are talking about just the extent of the disruption,” Pollak said.
For instance, she said, “the worst labor shortages are in the places that had the steepest declines in employment due to the pandemic.” That’s because of a few ripple effects. Some workers think their industry will never recover, and retire early. Others take a layoff personally, and opt not to return if they’re recalled. In the meantime, training pipelines dry up. That means returning to work requires a lot of new hiring – which is time-consuming.
(3) States are very different
“Many articles talk about it as though there are two groups of states: states ending benefits early, and states paying benefits for a long time, and that is a gross oversimplification of what’s happening.”
States also have a huge range of unemployment rates and vaccination rates, creating vastly different situations. For states severing benefits that are seeing lower job search activity, it’s important to consider what job-search activity was like before.
Some states have also already seen robust economic recoveries, with Utah leading the pack; so Pollak said “perhaps it makes more sense there for unemployment benefits to end early.”
Benefits also fluctuate by state, with some paying a lot less than others in weekly benefits. “Perhaps those places can afford without causing hardship to cut those expanded enhanced benefits earlier,” Pollak said of states with lower benefits. “Whereas in other states, there’s just less opportunity for job seekers, and it may be more difficult for them to leave benefits and go straight into a job.”