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6 causes Individuals do not return to work

A “Now Hiring” sign outside a store on August 16, 2021 in Arlington, Virginia.

OLIVIER DOULIERY | AFP | Getty Images

On the surface, the conditions seem ripe for a boom in the US labor market.

There are still 5 million fewer jobs than before the pandemic, but job vacancies are close to record highs. And hourly wages have increased, in some industries by more than 10% a year.

Meanwhile, federal expanded unemployment benefits ended on Labor Day (or earlier) and the kids are mostly back in the classroom. Both improved unemployment benefits and distance learning were believed to be barriers preventing people from returning to work.

However, this boom has not materialized in the last few months – at least not at the speed many expected. Employment growth slowed in September after rising sharply in spring and early summer and the labor force shrank.

“If you had ever told me that we still have millions of workers on the fringes and that wages are rising because people can’t find workers, you could blow me away with a feather,” said Diane Swonk, chief economist, accounting and consulting firm Grant Thornton.

Early evidence suggests that improved unemployment benefits played a marginal role in deterring people from work. So why don’t people rush back to take jobs?

According to economists, there are many reasons and complex nuances. Here are some of the most important drivers.

Covid

Health risks related to the ongoing Covid pandemic have clearly played a role in recent months, according to economists.

Employment growth slowed in August and September as the number of cases increased due to the delta variant. (During those months, 366,000 and 194,000 new payrolls were added, compared to 1.1 million in July and 962,000 in June.)

“The September job report is a reminder that the pandemic is still driving our recovery,” said Daniel Zhao, chief economist at Glassdoor job site. “The pandemic is still keeping workers out of work.”

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A record 4.3 million people quit their jobs in August. Frontline workers in sectors such as restaurants, bars and retail are quitting at the highest rates – which belives the idea that fear of contagion and the dangers of personal work play a role, Swonk said.

Employment growth should accelerate again, according to Zhao, as Covid cases subside. (There were about 76,000 average daily new infections as of October 18, less than half of the most recent high from September 1.)

early retirement

Early retirement has also reduced the pool of available labor.

Older adults are at higher risk of developing Covid and dying. They may have chosen to get social security and live on their nest egg instead of taking a risk at work, economists said. Grandparents may also have offered to look after their grandchildren and facilitate childcare for working parents.

“All of these things would push people out of the labor force in their 60s,” said Aaron Sojourner, labor economist and associate professor at the University of Minnesota.

In September, compared to two years ago, there were 3.6 million more people who said they didn’t want a job, Sojourner said, citing data from the US Bureau of Labor Statistics. People aged 55 and over account for 89% of the increase.

“I think we shouldn’t assume that they’ll never come back,” said Sojourner. “But right now they’re not back.”

Duty of care

Some workers – especially those unable to work from home – find it difficult to get off the sidelines because of their caring responsibilities.

For example, many schools have reopened to face-to-face learning for the new school year, which helps ease childcare restrictions for parents. However, Covid outbreaks have resulted in sporadic quarantine periods that can affect parents’ ability to keep a steady job or to commit.

“This uncertainty will make it difficult for workers, especially in front service roles,” said Zhao.

According to Sojourner, who analyzed data from the US Census Bureau’s Household Pulse Survey, there were 1.8 million more people in September compared to a year earlier who were not working because of caring for someone with Covid.

In addition, there were 336,000 other people who said they were out of work mainly because of caring for an elderly person, Sojourner said.

savings

Households across the income scale saw higher savings compared to pre-pandemic levels.

According to the JPMorgan Chase Institute, cash balances were up 50% in July 2021 compared to two years earlier for the typical household.

“With a little extra buffer, people might feel like they have a little more time to wait,” said Fiona Greig, co-president of the institute. “You don’t have to find a job right now.”

The federal government sent large amounts of money to families to combat the downturn caused by Covid, including economic controls, improved unemployment benefits, and increased food stamp benefits. Legislators also offered temporary relief to tenants, homeowners, and student loan borrowers.

Getting people back into jobs isn’t something you can do with the snap of your fingers.

Daniel Zhao

Senior Economist at Glassdoor

Families may also have spent less money if certain entertainment and other venues were closed during the crisis.

According to institute data, the balances of low-income families have increased by 70% and those of higher-income families by 35% over two years.

But that extra money may not last long and may push workers who are using up their savings to get back to work. According to the institute, higher-income households have the most savings on a U.S. dollar basis (more than $ 4,000) compared to low-income households (who have $ 1,000 in their checking accounts).

Wages

There may be record-breaking job openings – but that doesn’t necessarily mean companies pay a wage that workers accept.

According to the Bureau of Labor Statistics, wages in all private sector jobs have increased by more than $ 1 an hour, or 4.5%, over the past year. Some sectors have grown faster – for example, the salary in the Recreation & Hospitality industry rose 11% to $ 18.95 an hour. The Bureau attributes the upward pressure on incomes to rising labor demand.

But that higher salary may still not be enough to attract workers from the sidelines, Sojourner said. This is more the case when the quality of a job has deteriorated – be it due to health risks, increased working hours or other inconveniences such as dealing with unruly customers who defy the mask requirement. There can also be a competing priority such as childcare costs.

Corporate profits and productivity have risen more than average in the past two years, leaving many employers likely to have room to raise wages further, Sojourner said.

“The big question is, why aren’t companies offering wages and conditions fast enough to push people off the sidelines?” Guest said.

It will take

It will also take a while to process some of the friction that has built up in the labor market over the past year and a half, economists said.

Unemployed workers have had ample time during the pandemic to reassess their working lives and job expectations. Some may decide to change careers. The available jobs must also not be in the employee’s previous occupational field or in his geographical area.

There is also a discrepancy between employee and company expectations. For example, according to Tim Glowa, Principal at Grant Thornton, between a quarter and a third of companies’ chief financial officers expect their company to return to full-time on-site work, which is fundamentally inconsistent with the flexibility employees want, citing company surveys .

And many of the low-hanging fruits on the labor market have already been picked, so to speak. Many workers who were temporarily laid off (on leave) at the beginning of the downturn have been recalled to their old jobs or relocated to other jobs – leaving the more difficult suggestion of hiring the long-term unemployed or dropping out of the labor market, Zhao said.

“You can’t get people back into jobs with a snap of your fingers,” he added.

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