A whopping 40% of small business owners were unable to fill job openings last month – a seven-point increase from January, according to the latest report from the National Federation of Independent Businesses (NFIB), a small business advocacy group.
Many small businesses report it is difficult to get job candidates to even show up for interviews.
The inability to fill jobs comes in spite of the fact that at least 25% of small businesses increased compensation for those same job openings during the same time period, the report found.
Employers are feeling the crunch, with 24% claiming labor quality as their top business problem. Another 51% reported few or no qualified applicants for the positions they sought to fill, a statistic made all the more troubling as economists predict millions of new jobs will be needed by the end of the year.
The question is, WHY?
These findings are quite shocking given the current unemployment numbers in the country, which hover somewhere between 10 million and 18 million out of work (the government doesn’t exactly know how many). That’s a significant range, but one that still shows there are plenty of people who should be knocking down the doors of business owners right now seeking employment.
So, where are the workers? Could it be the federal government’s increases and extensions of jobless benefits are causing many Americans who would otherwise be working to decide to stay home? As I have warned in these pages over the last several months, I believe the answer is YES! I’ll come back to this question in more detail below.
But first, there are several factors which could influence the hesitation to return to work. The long-delayed reopening of schools has placed a tremendous burden on families. The lack of childcare has been especially harmful for working women. Globally, women have lost their jobs during the pandemic at a rate 1.8 times greater than men and are unlikely to return to work until childcare is available. Likewise, those with pre-existing health conditions may be reluctant to return to work. There are other reasons as well.
Yet all things considered, the federal government’s increase and extension of jobless benefits is likely the reason so many Americans are making the decision to stay home. Let’s look at some numbers.
Prior to the pandemic, the average person on unemployment received $378 a week, and most states offered these benefits for a period of 26 weeks or less. But in response to the lockdowns (that the government itself implemented), Congress began passing “relief” packages in 2020 which vastly expanded those benefits.
At the height of the pandemic, individuals were paid an extra $600 a week by the federal government, giving the average collector a weekly rate of $978 for an extended period of 39 weeks. No wonder a LOT of people don’t want to go back to work!
The country appears to be on the downside of the COVID crisis. Millions are being vaccinated, case numbers and hospitalizations are both down, and we now know the disease is not as deadly as once feared. If anything, workers should be encouraged to return to the workplace and begin the process of rebuilding our economy.
Unfortunately, Congress went in the opposite direction earlier this month passing a new “stimulus package” which renewed and extended unemployment benefits yet again. Under the new legislation, out-of-work Americans can collect benefits through September of this year (depending on the program) and will receive between $300-$400 additional federal dollars per week.
All of these increases have created an environment where many on unemployment receive more money to stay home than they earned in the workplace, creating an obvious incentive for people to stay on unemployment. This is infuriating, especially since it was so predictable. Yet most politicians just don’t get it!
The government’s response to the coronavirus has created many unexpected reactions including the employment dysfunction discussed above. Politicians may have viewed the increase in benefits as a benevolent act which would ensure those pushed out of work by government lockdowns kept their standard of living and avoided poverty.
This was the primary objective of the program. But there were many economics-informed voices (including me) who foresaw the unseen and harmful effects of such interventions all along – predicting these benefits could have big negative “unintended consequences.”
In a statement on the most recent stimulus package, President Biden said, “This legislation is about giving the backbone of this nation – the essential workers, the working people who built this country, the people who keep this country going – a fighting chance.”
That may be the intention. But the actual effect is to foster dependency and discourage work.
That’s not giving Americans a fighting chance. It’s setting them up to lose long-term. Unfortunately, many Americans staying at home don’t realize this. Sadly, it remains to be seen how this turns out. I’m not optimistic.
It might help if these employers offered some sort of living wage, i.e. $15/hr. Yes I know it’s inflationary; but it’s rising inequality that’s one of, perhaps the biggest reason for the divisiveness that we all agree is tearing the country apart.