- Stimulus checks and enhanced unemployment benefits are making it harder for companies to hire.
- “Why work when you can get more staying home?” said a McDonald’s franchisee.
- Hiring for some unskilled jobs was difficult pre-pandemic and could get worse in the coming years.
- See more stories on Insider’s business page.
Companies are struggling to hire, and some say the stimulus package is to blame.
In March, Congress passed a stimulus package that included up to $1,400 in direct payments for individuals. The package also included weekly payments of $300 in federal unemployment aid through September, in addition to unemployment benefits paid out by states.
“The biggest challenge out there is the federal government and the state government are going to continue with this unemployment,” Blake Casper, who owns 60 McDonald’s locations in Florida, recently told Insider.
“That is truly creating the incentive to not work right now,” added Casper, who has tested giving away $50 for anyone who comes in for a job interview. “And, how do you blame somebody? You can make more money on unemployment.”
A federal program that paid $600 a week in unemployment benefits for part of 2020 meant that two-thirds of people collecting benefits made more than they had when they were employed, according to economists at the University of Chicago. While the current $300 in federal benefits is less substantial, it still has the potential to make up for lost wages, especially when combined with enhanced state benefits, business owners said.
Jake Abramson, a chef in Brookline, Massachusetts, told Insider that unemployment benefits paid him roughly $400 more per paycheck than his job after he was laid off in March 2020.
He said he took a significant pay cut when he lost his unemployment benefits several months later because he returned to work to avoid a career setback.
If he was working in another job where he was simply clocking the hours, Abramson said, his calculus would be different.
“I would definitely take the unemployment over that,” Abramson said.
Companies are struggling to hire, and some blame stimulus benefits
John Motta, a Dunkin’ franchisee who serves as chairman of the Coalition of Franchisee Association, said the math just doesn’t add up for many people deciding between unemployment benefits and working at a fast-food chain.
In Rhode Island, for example, the average weekly unemployment check is $270 from the state, plus $300 in federal benefits – $570 total. In 2020, the median weekly earnings in the the restaurant industry was $582 nationally, according to US Bureau of Labor and Statistics data.
“It’s gotten to a crisis status today,” Motta said.
A McDonald’s franchisee told Insider that he had been unable to open dining rooms because he didn’t have enough workers to staff locations.
“Why work when you can get more staying home?” the franchisee said. “Stimulus and unemployment are killing the workforce.”
Staffing struggles extend far beyond the fast food industry.
“There is an insatiable appetite in America for unskilled labor,” said Marc Wulfraat, the president of logistics consulting firm MWPVL.
Ryan Alovis, the CEO of LensDirect, told Insider that the vision care company is struggling to hire employees, particularly for shipping, inventory, and distribution positions. The company is facing “chronic no-shows,” with only 50 percent of candidates showing up for scheduled interviews. Only half of those who are hired ultimately show up on their first day.
“It’s ghosting,” Alovis said. “It’s very rare that we’ll get a reason.”
Alovis said that a number of factors are making hiring difficult. He said he supports federal benefits, but believes that the higher unemployment payments and stimulus checks are playing a role.
“I think that the government needs to be more methodical with how they’re offering these benefits and to whom they’re offering these benefits,” Alovis said. “I think that the government needs to incentivize people to get back to work.”
Critics say that employers are too quick to blame benefits
Last week, an Outback Steakhouse in Memphis sparked backlash online over a sign that said “people just do not want to work,” due to “stimulus money and tax time.” Tami Sawyer, a local county commissioner, posted a photo of the sign to Twitter.
“For the Outbackers that do show up for work, we ask for your understanding and patience,” the sign read.
-Tami Sawyer (@tamisawyer) April 13, 2021
Sawyer told Insider that she was disappointed by the sign. (A representative for Outback told Insider the sign was posted by an employee without approval from the restaurant or company, and was quickly removed.)
“I’ve been very involved with COVID-19 public health and economic recovery as a commissioner,” Sawyer said. “People who were working low wage jobs before the pandemic struggled as their places of employment closed. They had to pivot to other work like Amazon.”
Sawyer said that assumptions about why people do not return to the same job or industry as businesses reopen make her bristle, especially when there are accusations of laziness.
“It’s racially and economically coded,” Sawyer said. “Misperceptions and prejudice assumes working class people are just sitting around buying beer with their $1,400 and that’s just not the story.”
Credit Suisse analyst Lauren Silberman told Insider that, while the stimulus is a factor in why it’s difficult for companies to hire, it is not the root cause. Many industries were facing labor shortages before the pandemic.
“People want to work, if they have the opportunity,” Silberman said.
Pre-pandemic, the unemployment rate dropped to less than 3% in some states, a figure that would be typical for a labor shortage. Unemployment is currently 6%, which would historically indicate plenty of people are looking for jobs. But, pandemic-era childcare concerns and fears of catching coronavirus have made returning to work less enticing for some employees.
“I think there’s a fear element,” Silberman said.
A fundamental shift in American labor could be brewing
Some employers are considering raising wages to entice people to return to work.
Casper, the McDonald’s franchisee, said that he is considering raising starting wages from $12, which is more than $3 above Florida’s minimum wage, to $13 per hour. Motta said that companies are going to be forced to raise pay to compete, rendering higher minimum wage regulation obsolete.
Higher pay will likely be offset with higher prices for consumers. In states that have passed minimum wage regulation, CEOs say the chains have passed on the costs to customers.
“It’ll put people out of business, that’s for sure,” Motta said. “Will people pay $5 for a cup of coffee at Dunkin’ Donuts? I don’t know. I really doubt if they would. Would you pay six bucks for a hamburger at McDonald’s?”
Some employers will likely try to hold out on raising pay in hopes that more people will apply for lower-paying jobs as federal enhanced unemployment benefits expire in September. But Wulfraat said he expects hiring unskilled, inexpensive labor to only get worse in the coming years.
The percentage of the US that is 65 or older is swiftly growing as Baby Boomers enter retirement age, cutting into the labor force. Younger workers are more likely to be tech savvy, Wulfraat said, making them more prepared to apply for skilled jobs that do not involve the manual labor of a warehouse or restaurant.
“Think about all of the the trades where it’s heavy, dirty, smelly – all those nasty jobs that have to get done,” Wulfraat said. “Nobody wants to do that work anymore, cause there’s other things they want to do. Their priorities are different.”