A National Dilemma

By Dean Barber

With millions of Americans still out of work and job openings at a record high, policymakers are dealing with an unexpected problem: How to coax people back into the labor force.

Congressional lawmakers of both parties are considering incentives such as providing federal funding to pay for hiring bonuses for workers and expanded tax credits for employers.

A proposal from Democrats would give federal funding to local workforce development groups to provide job training and placement for people out of work for more than six months.

Republican governors in several states, including Montana, Arizona, and New Hampshire, have also moved to offer hiring bonuses to workers on unemployment rolls who find jobs, using money received from the $1.9 trillion Covid-19 relief law Congress enacted in March. Many of those states have also said they would cut short the $300 extra federal unemployment payments in the coming weeks.

New Hampshire will pay a $1,000 hiring bonus to full-time workers—$500 for part-timers—who earn less than $25 an hour and stay on the job for at least eight weeks. The state has committed $10 million to the bonus program, which is available until funding runs out.

The Federal Reserve's most recent "Beige Book" report of anecdotal information on business activity collected from contacts nationwide shows that "it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople."

 U.S. employers had 9.3 million job openings available at the end of April, the Bureau of Labor Statistics recently reported the highest number recorded since the government started collecting the data in 2000.

Employers hired 6.1 million workers in April, according to the monthly Job Openings and Labor Turnover survey, a small increase from the 6 million hired in March.

 The U.S. Chamber of Commerce has launched America Works, a plan to mobilize industry and government to alleviate what the group calls "America’s deepening worker shortage crisis."

"This is Operation Warp Speed for jobs," said Suzanne Clark, the Chamber's president and CEO. "As we stand on the cusp of what could be a great American resurgence, a worker shortage is holding back job creators across the country."

The Chamber says there are now half as many available workers for each open job across the country as there were on average over the past 20 years — 1.4 vs. 2.8.

Clark said: "The worker shortage is a national economic emergency, and it poses an imminent threat to our fragile recovery and America’s great resurgence."

Economists say labor market tightness is giving workers more power in their job choices, especially in the hospitality industry. “High quits mean workers feel comfortable leaving their jobs in search of better matches,” wrote Elise Gould, senior economist at the left-leaning Economic Policy Institute. “Low layoffs are an obvious good. The economic recovery is gaining momentum.”

Companies are getting creative, offering a cornucopia of new benefits as human resources officers and employees alike rethink what makes for a compelling compensation package,” reports The New York Times.

At Waste Management, the company will pay for employees to earn bachelor’s and associate degrees and, in a notable expansion of this kind of benefit, will begin offering scholarships for spouses and children as well.

The meatpacking giant JBS began paying for college degrees for workers, and one of their children, in March.

My take: The labor market is a market, which means buyers (employers) need to offer the right price to get the right result.

Industries that previously relied on cheap labor before the pandemic are finding it a tougher row to hoe. The solution: offer more and you will get more.

Source Credit: Dean Barber at Barber Financial Advisors