Do the unemployed refuse to work?

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    Photo by Matt Majewski @ Flickr

    When the US Department of Labor released its April employment growth data, it sent a shock wave across the financial industry. As the pandemic recedes and the US economy picks up again, Bloomberg economists widely expected a hiring frenzy of around 1,000,000 jobs. Instead, they got about a quarter of that, or 266,000 full-time jobs added to the payroll.

    Usually that wouldn’t be so interesting for a story. Financial eggheads get their math wrong, whoop-de-freakin-doo. The really interesting thing, however, is in the underlying details. Why did goal setting fail so badly?

    Because this time not because economists underestimated the pandemic or the speed of vaccinations or even because employers expanded their workforce. Instead, this job shortage was caused by employers who were trying to hire people and were unable to do so.

    Now the recession has shifted into a strange new phase. People no longer want work that isn’t there. Instead, there is now a high unemployment rate and a gap in the number of vacancies. So what the hell is going on here? Do people just refuse to work?

    Are you responsible for unemployment benefits?

    The prevailing theory circulating in the mainstream media is that Americans refuse to work because the government is simply paying the people too much money.

    The theory is that the federal government’s expansion of the unemployment system by several trillion dollars created a socialist welfare state that keeps people from working. Why work hard when the government is willing to pay you to sit on your ass and do nothing?

    The idea is not entirely out of left field and that is why it is so difficult to design income support programs. Pay too little and you leave too many people in poverty, but pay too much and you get Denmark where people sit around and just “be happy”.

    Pooh. Disgusting.

    Here is the problem with that argument. The expanded federal unemployment program, which created a weekly benefit of $ 600, was started by … President Trump. The Coronavirus Aid, Aid and Economic Security Act, passed in March 2020, was passed unanimously by both parties and signed into law by Trump. The newer stimulus plan, the American Rescue Plan Act, was passed in March 2021 and extends the existing unemployment benefit to a much more modest $ 300 per week.

    Now a $ 600 weekly benefit that both parties were perfectly fine back when Trump was president is being accused of being a socialist / communist takeover and kind of the worst thing now that Biden is president there ever was. Classic.

    The second problem with portraying federal unemployment benefits as a socialist giveaway for free money is that it is actually not free money. A Universal Basic Income (UBI) program that gives money to all people in general would be free money and, if ever implemented, would have to be very carefully designed to ensure that it does not encourage people not to work.

    The federal government’s improved unemployment benefit complements the existing unemployment benefit program. This means that the normal rules of each state’s unemployment program continue to apply. You must have been employed prior to the pandemic, your job had to be canceled for pandemic-related reasons, and if you are offered your job back you must either accept it or lose further unemployment benefits.

    Remember that unemployment benefits are funded from an employee’s previous wage contributions. So these services are less “lazy people subsidized by hard-working taxpayers” than “people who get their own contributions back”. The program is similar to Social Security, and no one ever yells at boomers for using government benefits when cashing their SSA checks.

    And you can argue that the unemployment system is prone to fraud, but literally every other government program, including social security, is. If the real problem is people cheating on the system, the solution is to step up enforcement to catch people who act maliciously or to fill in the loopholes that allow people to take advantage of the system in the first place.

    The Republicans are not proposing that. Instead, 17 Republican governors have announced that they will do so unilaterally block Federal funding from their voters as of today, March 17th. It’s an … interesting way of governing.

    While unemployment benefits are an easy fool to blame for this inability to recruit, it seems that politicians have the simple aim rather than the real problem.

    The SheCession

    Another more interesting explanation for the attitude gap is what is known as “shecession”. Basically, the shecession is the phenomenon that, unlike previous recessions, the pandemic has hit women in the workforce far more severely than men.

    It’s hard to pinpoint the exact cause of a fault, as it’s a strange combination of factors that made this possible. First, the sectors hardest hit happened to be those predominantly female-dominated, such as retail, tourism and food services. Second, the jobs in the sectors that tended to be more customer-centric, and therefore the first to be laid off, tended to be occupied by women, such as waitresses, flight attendants and customer service agents. In retail alone, almost 95% of job losses since February 2020 have been women.

    And finally schools were closed and switched to virtual learning. Since the responsibility for childcare rests primarily with women, the goddamn kids keep women at home and can’t look for work. According to a survey by the Kaiser Family Foundation, 30% of women had to retire from working life because their child’s school or daycare center was closed. Many elementary schools in the US had no plans to reopen for the rest of the US academic year.

    Add that all up and we have a shecession. Women first lost their jobs, then were stuck at home taking care of their children. They were the last to get their jobs back, probably for a lower wage than anyone else. So, while we have all suffered from this pandemic, save yourself a thought for the women in our lives. You suffered a lot more.

    What about real estate?

    And finally there is our old friends real estate.

    This hasn’t got its ugly head upright, but I bet it will when the economic recovery drags on. The most recent recession, an unexpected factor in the extension of the economic recovery in 2008/2009, was the inability of people to move to where jobs were. This, of course, was caused by the real estate crash that hit American house prices. With so many people submerged with their mortgages, people were trapped in their homes and unable to move or sell because they owed more on their mortgages than their property was worth. Although there were jobs halfway across the country, people couldn’t take advantage of them because they were slaves to their homeland.

    We are now prepared for a similar situation. There was great shock and confusion in the media about how house prices continued to rise in the middle of a recession. But it wasn’t downtown cores where all the shopping spree took place, but rather sleepy towns like Columbus, Ohio and Hamilton, Ontario where city dwellers fled their virus-infested condos to find single-family homes with strange features like “yards.” and swarming “yards” to “driveways.”

    The resulting bidding wars drove property prices in these small towns to insane levels. These buyers have run insane debts buying property at big city prices but in places where the job market isn’t around to support them.

    During recovery, these people will find themselves underwater and trapped in these overpriced albatrosses, just like the unfortunate victims of the 2008/2009 recession.

    Only this time, it’s 100% your fault. While subprime lending has been blamed for the 2008/2009 crisis, many of the people whose house prices have been hammered have done nothing wrong themselves. Like all of us, they have been wiped from history through no fault of their own.

    This time around, the people who are taking their mortgages underwater will be responsible for paying way too much for homes that were never worth that much to begin with. These are the people who got carried away by FOMO, got into bidding wars and let their emotions overwhelm them. When interest rates go down, take the opportunity to pay off debts, and stop entering into it! Unfortunately, they will realize their mistake far too late to do anything about it.

    Conclusion

    So there you have it. These are three factors that are hindering the labor market in economic recovery in this state. The first, which I think is overdone for political reasons, the second is a problem, but will eventually go away once schools reopen, and the last one I think will become a longer-lasting factor that the economy does for Will plague months or years after the peak of vaccinations.

    What do you think? Will our economic recovery be okay or do you think it will get into trouble and why? Let’s hear it in the comments below!


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