May 9, 2021

by Steve Stofka

The April labor report released this week was far below expectations. Economists expected an addition of one million jobs; the reported job increase was 266,000. Some analysts and politicians attributed the lower-than-expected job gains to generous unemployment benefits that dissuade job applicants from seeking employment. For centuries, the upper class have believed that the working class is inherently lazy, that people only work out of necessity. It is an implicit assumption of mainstream economics which is founded on the disutility of labor.

When asked to comment on the influence of “plussed up” unemployment benefits at a press conference on Friday, Treasury Secretary Janet Yellen raised a data point that contradicted that concern. States with the most generous unemployment benefits have the highest job-finding rates (White House, 2021). We would expect the opposite.

Ms. Yellen cited other factors with far greater importance. Topmost was the lack of childcare. 4.2 million women dropped out of the workforce in April 2020. Two million still have not returned. The two childcare facilities near my home in Denver are still closed.

A second factor was a mismatch of skills. Many entertainment venues are still closed. These typically employ younger workers under 25 with a modest skill set. They man ticket booths and concession stands at movie theaters. They take orders at restaurants cook food and bus tables. They stock and sort food items on our grocery shelves. Many have childcare needs, which are not being met. For these younger workers and their families, a modest wage that barely covers childcare expenses is not an attractive option.

The crunch in the construction industry has been an ongoing development for more than a decade. I spoke to a dental assistant this week, a man in his 20s. During the financial crisis, many parents with blue collar skills lost their jobs. Parents with some college education or a degree didn’t. Many kids compared their circumstances with others at school and were attracted to white collar jobs as being more permanent, even if they didn’t pay as much. This younger generation, dubbed Gen Z, experienced the disruptions to their homelife brought on by the financial crisis. Now they are experiencing another severe crisis as adults. Will they spend most of their lives seeking stability?

Economists and policymakers argue: are employers not offering a high enough wage? Are the unemployed unwilling to lower their wage expectations? The economic euphemism is “sticky prices” – that prices are slow to change to evolving circumstances. A more accurate term would be sticky contracts. Both employers and job applicants have existing arrangements – leases, childcare needs, school district preferences, mortgages, rents – at prices that are resistant to change.

The heartening aspect of this debate is that we are discussing these issues. The prior administration would call a disappointing labor report “fake news.” They would have cast doubt on the intentions of government officials who compiled the data as a conspiracy against the former President. A smart 8-year-old could tell a more convincing lie. After four years, it’s refreshing to have an adult public conversation.

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Photo by Christina @ wocintechchat.com on Unsplash

White House. (2021, May 08). Press briefing by press SECRETARY Jen Psaki and Secretary of the Treasury Janet Yellen, May 7, 2021. Retrieved May 09, 2021, from https://www.whitehouse.gov/briefing-room/press-briefings/2021/05/07/press-briefing-by-press-secretary-jen-psaki-and-secretary-of-the-treasury-janet-yellen-may-7-2021/