6 reasons why Americans aren’t returning to work

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

OLIVIER DOULIERY | AFP | Getty Images

On the surface, the conditions may seem favorable for the boom of the labor market in the United States.

There are still 5 million fewer jobs than before the pandemic, but job opportunities are near record levels. Hourly wages, in some sectors, rose by more than 10% per year.

Meanwhile, boosted federal unemployment benefits on Labor Day (or before) expired and children are largely back in the classroom. Boosting wages for the unemployed and distance learning were both thought to be impediments to people returning to work.

However, this boom has not materialized in recent months – at least, not at the rate many expected. Job growth slowed in September after picking up in the spring and early summer, and the workforce shrank.

said Diane Sonk, chief economist for the accounting division and consulting firm Grant Thornton.

Early evidence suggests that enhanced unemployment benefits played at most a small role in preventing people from working. So why aren’t people rushing back to jobs?

There are many causes and complex nuances, according to economists. Here are some of the main motives.

Corona virus disease

The health risks associated with the ongoing Covid-19 pandemic have clearly played a role in recent months, according to economists.

Job growth slowed in August and September, when the number of cases rose due to the delta variable. (There were 366,000 and 194,000 new payrolls added in those months, respectively, compared to 1.1 million in July and 962,000 in June.)

“The jobs report for September is a reminder that the pandemic is still controlling our recovery,” said Daniel Chow, chief economist at job site Glassdoor. “The pandemic is still keeping workers out of the labor force.”

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A record 4.3 million people quit their jobs in August. Sonk said frontline workers in sectors such as restaurants, bars and retail quit at the highest rates — lending credence to the idea that fear of infection and personal work risks play a role.

Job growth should accelerate as Covid cases recede, according to Zhao. (There were nearly 76,000 new daily infections on average as of October 18, less than half the last peak on September 1.)

early retirement

Early retirements also reduced the number of workers available.

Older adults are at greater risk of serious illness and death from Covid. Economists said they may have chosen to start pulling Social Security and live out of their nest rather than risk working. Grandparents may also have offered to watch over their grandchildren and ease the childcare duties of working parents.

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

Sojourner, citing US Bureau of Labor Statistics data, said that compared to two years ago, there were 3.6 million more people outside the labor force in September who indicated they didn’t want a job right now. People aged 55 or over account for 89% of the increase.

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

care responsibilities

Care responsibilities have made it difficult for some workers — especially those who cannot work from home — to step off the sidelines.

For example, many schools have reopened for in-person learning for the new school year, which has helped ease childcare restrictions on parents. But the Covid outbreak has led to intermittent periods of quarantine that may confirm parents’ ability to keep or stick to a steady job.

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

Moreover, in September, there were 1.8 million more people out of work due to caring for someone sick with Covid, compared to the previous year, according to Sojourner, who analyzed data from the US Census Bureau’s Household Pulse Survey.

On top of that, Sojourner said there are another 336,000 people who said they are not working primarily because of caring for an elderly person.

savings

Across the income scale, households were able to accumulate higher savings compared to pre-pandemic levels.

The typical household’s cash balances rose 50% in July 2021 compared to two years earlier, according to the JPMorgan Chase Institute.

“People may feel that there is a little extra barrier at hand, that they have more time to wait,” said Fiona Gregg, co-chair of the institute. “They don’t have to find a job at the moment.”

The federal government has sent large sums of cash to families to combat the slowdown caused by the Covid virus, including stimulus checks, boosted unemployment benefits and increased food stamp benefits. Lawmakers also offered temporary relief for renters, homeowners, and student loan borrowers.

Getting people back to their jobs isn’t something you can do in a jiffy.

Daniel Chow

Chief Economist at Glassdoor

Families may also have spent less money with some entertainment and other places closed during the crisis.

Stocks of low-income households are up 70%, and those of high-income families are up 35% over two years, according to institute data.

But this extra money may not last long, and may even push workers who have exhausted their savings to work. High-income families have more savings on a dollar basis (more than $4,000) than lower-income earners (who have $1,000 in their checking accounts), according to the institute.

wages

There may be near-standard jobs – but that doesn’t necessarily mean companies are paying wages that workers will accept.

Wages have risen by more than $1 an hour, or 4.5%, in the past year across all private sector jobs, according to the Bureau of Labor Statistics. Some sectors rose even more — entertainment and hospitality wages rose 11%, to $18.95 an hour, for example. The bureau attributes upward pressure on profits to higher demand for labour.

But Sojourner said that higher salary may not be enough to attract workers from the sidelines. This is likely to be the case, he said, if the quality of the job deteriorates – whether due to health risks, increased working hours or other inconveniences such as dealing with unruly customers opposing the requirement for masks. There may also be a competing priority such as the cost of childcare.

Sojourner said that corporate profits and productivity have risen more than average wages over the past two years, so many employers likely have room for a wage increase.

“The big question is, why aren’t companies making offers of wages and working conditions fast enough to put people off the sidelines?” Sojourner said.

It will take time

Economists said it will take some time to resolve some of the controversies that have built up in the labor market in the past year and a half.

Unemployed workers have had plenty of time during the pandemic to reevaluate their working lives and what they want out of a job. Some may choose to switch careers. The available jobs may not be in the worker’s previous occupational field or in his geographic area.

There is also a mismatch between the expectations of workers and the company. For example, between a quarter and a third of a company’s chief financial officers expect their organization to return to full-time personal work, which fundamentally goes against the flexibility workers want, according to Tim Galloa, Grant Thornton’s director. , citing company surveys.

Much of the low-hanging fruit has already been reaped in the labor market, so to speak. Zhao said that many workers who were laid off (leave) early in the downturn have been recalled to their old jobs or moved on to other jobs — leaving the tougher proposal to hire permanently unemployed people or people who have fallen out of the workforce.

“Getting people back to their jobs is not something you can do in a jiffy,” he added.

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