Hiring struggles will force employers to pay above minimum wage, but may also speed up automation.
On May 10th, President Joe Biden announced that unemployed Americans would no longer be eligible for unemployment benefits if they turn down a suitable job. Many believe President Biden's announcement is in response to many employers complaining of hiring struggles due to the federal government's unemployment benefits.
The three hundred dollars ($300) per week in unemployment benefits enacted by the CARES Act is set to end on Labor Day, September 6th, 2021. However, so far, sixteen states have announced that they are ending their participation in the unemployment program roughly two months early. To date, all states that have opted out are led by Republican governors. Those states include Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah, and Wyoming. The states' governors and representatives have spoken out about how the enhanced unemployment benefits keep people from looking for jobs. Senator Charles E Grassley (R-IOWA) said, "Common sense tells you that if you want people to go back to work, then the government can't be an unfair competitor by paying people not to work."
The states that have opted out will no longer issue an extra $300 a week to workers. However, those receiving state benefits will continue getting that aid, which generally amounts to half their pre-layoff wages. According to the Labor Department, the average person received $350 a week in state benefits in March.
Covid-19 tests and vaccines are more readily available, and the CDC recently announced that fully vaccinated people can resume activities without wearing a mask or physically distancing. Hopefully, on our way back to some form of normalcy, many businesses are still limited in their capacity to operate like they used to before the pandemic hit.
From social media comments to barbershop talk, it is no secret that some people aren't returning to work due to the generous unemployment benefits that the U.S. government has offered to those who have been laid off due to the pandemic. Some are receiving more income than what they would be receiving at their pre-pandemic jobs. However, economists don't believe benefits from the government are the primary factor of why jobs are struggling to hire. According to the Wall Street Journal surveys, many people are uncomfortable returning to work due to potentially being exposed to Covid-19. Many schools or daycares are still closed or open with limited capacity, forcing parents to stay home to care for their children. Those who are back working favor jobs that give them more flexibility than traditional retail jobs, such as driving for Uber or delivering food for DoorDash.
Viral videos and photos have shown signs at lower-wage paying jobs, such as restaurants, warning of slow service due to shortage of workers. To combat the issue, many are hopeful that it will force jobs to pay above the federal minimum wage, which is $7.25 for nonexempt employees. The fight to raise the minimum wage to $15.00 started before the pandemic hit due to millions of workers living paycheck-to-paycheck and regularly facing financial hardships. With the current hiring struggle, lower-wage-paying employers now acknowledge that to compete and be attractive to potential employees, paying minimum wage won't get needed positions filled. They must improve their pay, benefits, flexibility, and culture to combat hiring difficulties.
Image credit: Patrick Hayes / Twitter: @KOBPatrickHayes
With each cause, there is an effect, and that is no different with the potential pay rise. With the increase in wages comes the increase in food prices, and that increased pricing will have to be paid for by the customer. Chipotle CFO Jack Hartung said that a $15 federal minimum wage would mean a slight increase in burrito prices.
While many stand firm in their faith that the hiring struggles will force an increase in wages, others fear that the pay increase will only be short-term, and the long-term focus for lower-wage-paying employers will be automation. For the past few years, studies have found strong links between automation and inequality. In fact, job-replacing tech has directly driven the income gap since the late 1980s. The investment in automation is an expensive one, but a study by MIT concluded that across the U.S. from 1993 to 2007, each new robot replaced 3.3 jobs.
According to the U.S. Bureau of Labor Statistics, 266,000 jobs were added by employers in April. The unemployment rate rose slightly to 6.1%, which shocked many who expected the unemployment rate to continue trending downwards. According to the report, 9.8 million people are still unemployed. Pre-Covid-19, only 5.7 million people were unemployed, compared to the 9.8 million today. In February 2020, the unemployment rate sat at 3.5% compared to today's 6.1%.