Help wanted signs have cluttered the windows of many businesses across Wyoming and the United States for months. Businesses want to hire people, but there aren’t enough applicants to fill available positions.
It’s a strange economy where people have money to spend, but businesses don’t have enough people wanting to work and earn the money they spend.
A new study by the Committee to Unleash Prosperity, a free market advocacy group, suggests that excessive unemployment benefits may be one contributing factor.
Fewer Working
The Bureau of Labor Statistics reports the U.S. workforce participation rate was at 62.1% in November. This was a bit lower from where it was prior to February 2020 and the pandemic caused unemployment rates to skyrocket.
There are 5.6 million people in this country who can work but haven’t actively looked for work in the past four weeks or were unavailable to take a job, the agency reports.
Unemployment Pays
Casey Mulligan, professor of economics at the University of Chicago, and EJ Antoni, research fellow for regional economics at the Heritage Foundation’s Center for Data Analysis, produced a study that found that in 24 states, Wyoming included, unemployment benefits and Affordable Care Act subsidies for a family of four with both parents not working are the equivalent of at least the national median household income.
In Wyoming, the study says the earned income equivalent for a family with both parents not working and two dependents, including unemployment and ACA benefits, was $79,294 last year.
Wyoming ranks 14th among all states, with Washington having the highest at $122,653. Mississippi’s combined benefits for the same size family was the lowest at $37,486.
“These ‘safety net programs’ are designed to keep families out of poverty,” the study’s authors wrote. “But the expansion of assistance, especially in subsidized health insurance to families with children and no parents working, can mean that families can earn as much or more income from receiving government assistance than the median household does from working.”
Pandemic Effect
During the pandemic, the federal government kicked in supplemental unemployment benefits to the tune of $600 per week, which was on top of state benefits, and the number of job openings rose sharply.
In August 2020, which was the first full month in which the supplemental benefit wasn’t offered, the number of job openings declined.
A $300 weekly supplemental benefit was introduced in January 2021, job openings again rose, according to the study. Job openings would again decline in August 2021, when half of states terminated the extra benefits.
These are on top of other financial help available to people, like rental assistance programs.
Far-Reaching impacts
Mulligan told Cowboy State Daily that the tendency for the federal government to increase unemployment benefit amounts or extend the time a person can receive benefits during times of economic hardship will have far-reaching impacts on the economy.
“If and when the federal government were to acknowledge a recession, it would immediately create and expand even more benefits for those who are unemployed or poor, thereby making the recession deeper and longer,” Mulligan said.
In his 2012 book “The Redistribution Recession,” Mulligan analyzed how well-intended responses to the economic circumstances of the Great Recession reduced incentives for people to work and businesses to hire.
“It happened again in 2020,” Mulligan said.
Millions Not Working
The study estimates that more than 3 million people of working age that could be working aren’t today compared to the period prior to the pandemic.
The authors acknowledge that there are many factors that could explain these “missing” workers, including fears of contracting COVID-19, early retirement and the phenomenon being called “long COVID.”
The authors argue that the generous benefits being paid out to families without workers is among the causes.
Besides health insurance subsidies and unemployment benefits, these generous benefits also include food stamps and the relaxation or elimination of work requirements for eligibility to receive the benefits.
How To Address It
The authors propose states reduce unemployment insurance maximums and provide more targeted benefits.
Mulligan explained that states changed who was eligible for benefits, which broadened those who could receive it.
“For many years prior to the pandemic, unemployment benefits were targeted to people who were laid off from longstanding jobs,” he said. “They were not for people who worked occasionally or for people who quit rather than being laid off.”
