Only about one in 28 unemployed people actually turned down jobs to stay on expanded unemployment, Fed study says

Now Hiring sign
A customer walks by a now hiring sign at a BevMo store on April 02, 2021 in Larkspur, California. Justin Sullivan/Getty Images
  • Beefed-up unemployment had a “small” impact on workers looking for jobs, a new Fed paper shows.
  • Labor market data show on average, just one worker out of 28 chose UI over accepting a job offer.
  • The authors said the $300 weekly benefit likely affected “employers’ perception of worker availability.”
  • See more stories on Insider’s business page.

As US employers struggle to find workers, some corporate leaders and politicians have blamed the federal expansion of unemployment insurance (UI) benefits for a “labor shortage” and over 20 Republican governors have moved for its early cancelation.

But new research suggests that enhanced UI may not be the reason jobs are going unfilled.

A working paper in which researchers at the Federal Reserve Bank of San Francisco analyzed labor-force data finds that beefed-up unemployment benefits didn’t have too much of an impact on workers looking for jobs.

In a given month in 2021, “about seven out of 28 unemployed individuals receive job offers that they would normally accept, but one of the seven decides to decline the offer due to the availability of the extra $300 per week in UI payments,” authors Nicolas Petrosky-Nadeau and Robert Valletta write.

In other words, just one worker out of 28 – about 3.5% of all unemployed workers – elected to continue receiving UI instead of going back to work.

“The $300 weekly UI supplement currently in place has been making a small but likely noticeable contribution to job-finding rates and employers’ perceptions of worker availability,” the authors write.

According to the new paper, the increase in weekly unemployment benefits didn’t dissuade people from returning to work. “The value of a job, especially in a depressed labor market, significantly outweighs the value of the temporary additional UI income,” the authors write.

The only workers who preferred to remain on unemployment over returning to work in early June were those in the lowest-paid professions: food service and janitorial services.

Read more: There’s a simple solution for companies struggling to hire: Pay workers more

Those findings are borne out by the accounts from restaurateurs who have said higher-paying warehouse and logistics jobs at companies like Amazon are making it harder to staff their kitchens and dining rooms.

As Miami chef Phil Bryant told The Washington Post, “If I can make $17 per hour at an Amazon warehouse, but only $14 per hour as a line cook, a notoriously hot, stressful, intense job, why would I do that?”

More recently, Pittsburgh ice cream shop owner Jacob Hanchar told MSNBC he too believed there was a labor shortage – that is until he doubled his starting wage to $15 and received over 1,000 applications for 16 positions.

While the current employment situation is a puzzling one, the paper indicates the role – or lack thereof – that high unemployment benefits are playing in keeping workers home. Other possible explanations for the labor tightness include school closures and elderly workers’ fears over COVID, according to UBS. The shortages plaguing various sectors could also play a role.

Regardless, economic recovery is still in uncharted territory as Americans begin to venture outside and back to work, and the labor shortages may have a short shelf life: BofA expects they’ll fade by 2022.