Recent data from the federal government reveals there are more job openings now than at any other point on record. While the vacancies leave the labor market wide open for those seeking employment, businesses, especially small ones, are suffering.
After all, a company can’t operate effectively on a skeleton staff. But why are these jobs going unfilled? The current unemployment rate is well above pre-pandemic levels. The answer, as usual, is misguided government policy.
During the initial months of the pandemic, the U.S. economy shed more than 22 million jobs—largely because of government-imposed lockdowns. With 15 percent of the workforce decimated, extra cash was appropriated by Congress to temporarily strengthen unemployment benefits distributed by the states. Since then, what was supposed to be momentary relief to address a period of uncertainty has been extended. Currently, $300 in extra federal weekly unemployment benefits (on top of state aid) are scheduled to remain in place until September.
As economist Milton Friedman famously noted: “Nothing is so permanent as a temporary government program.”
These inflated government handouts have flipped worker motivations upside down—incentivizing people to remain at home instead of returning to work. Spending time on the hiking trail or enjoying the beach sure beats the nine-to-five grind if Uncle Sam is helping to cover the tab. One report from Bank of America noted that someone earning less than $32,000 a year would actually be better off collecting expanded unemployment benefits rather than a paycheck. That’s the rough equivalent of a $15 per hour full-time job and is an incentive structure that is slowing the transition back to the labor force.
The Biden administration has refused to acknowledge the connection between expanded unemployment benefits and staffing shortages. But it’s not challenging to connect the dots.
A recent report from the Bureau of Labor Statistics revealed that 266,000 jobs were brought back in April, falling well short of economist expectations that predicted one million new positions. The mediocre performance is not because of a lack of employment opportunities, but rather a shortage of workers who are willing to fill them.
An alternative data set from ZipRecruiter, an online jobs platform, shows the website listed nearly 15 million job vacancies in March—a significant jump compared to the pre-pandemic norm of about 10 million. And as demand for employees grows, the labor force participation rate, or the proportion of Americans who are either working or actively seeking a job, has failed to fully rebound.
Members of my organization, the Job Creators Network, provide anecdotal examples.
While pent-up consumer demand is expected to drive hordes of customers to businesses this summer, Carlos Gazitua, a restaurant owner in Miami, is scrambling to find enough employees to staff his locations. Another restaurant in Rehoboth Beach, Delaware is being forced to close a couple days a week because staffing levels are one-third of what they should be. Other small business owners, including Polly Lawrence in Colorado and Carlos Ruiz in Arizona, face similar challenges and all argue that expanded unemployment benefits are a driving factor.
Activists are using the labor shortage as a tool to push for higher minimum wage levels—arguing the increased compensation will lure sidelined workers back into the job market. Only one problem: unlike the government armed with your taxpayer dollars, small businesses operate under razor thin budget margins (pandemic or not). So hiking labor costs will inevitably force entrepreneurs to scale back operations or close altogether. While employment vacancies will no longer be an issue under these conditions, workers on the other hand won’t have a job to return to.
2020 was one of the toughest years on record for small businesses. As if recovering from a pandemic wasn’t challenging enough, Uncle Sam has inadvertently, or not, erected yet another barrier. At one point, expanded unemployment aid was warranted, but that time has long passed. It’s time for the Biden administration and Congress to ratchet down federal contributions to jobless benefits so America can get back to work.
Elaine Parker is the President of the Job Creators Network Foundation.