According to the April jobs report, America is still down 8.2 million jobs from February 2020. Why are so many sectors of our economy unable to find workers?

Every politician and armchair economist has their theory. None of them get to the bottom of this current economic calamity.

Is there even a worker shortage? There’s much debate on that. Read on to learn more about the state of the US labor market and why many American industries now struggle to find workers.

Initial Pandemic Impact

March 2020 was an economic calamity the likes of which Americans hadn’t seen since the Great Depression. From March to May, 38.6 million Americans filed for unemployment, a quarter of all American workers.

Due to the unprecedented crisis, US Congress acted fast. They passed the Families First Coronavirus Response Act. This bill, signed into law by President Trump, included many aid mechanisms designed to protect workers and businesses.

Less than ten days later, the Coronavirus Aid, Relief, and Economic Security Act (CARES) became law. These two combined bills offered:

  • Emergency Paid Sick Leave to all workers employed by companies with less than 500 workers
  • Paid Family Leave to all workers employed by companies with less than 500 workers
  • 100% tax credits for companies now required to provide paid leave
  • Funding for state unemployment systems to handle claims
  • Food assistance program funding
  • Expanded eligibility for unemployment compensation
  • Pandemic Unemployment Assistance (PUA) for self-employed workers
  • The Federal Pandemic Unemployment Compensation program that offered unemployed workers $600 per week

This swift action provided unemployed citizens a much-needed lifeline. Even still, many workers fell through the cracks. Workers waited weeks and months for their unemployment claims.

Politicization

Though Congress acted during the opening weeks of the pandemic, politics followed. As this happened, our society could no longer agree on COVID-19 mitigation efforts.

Citizens and legislators protested lockdowns and masks. The more people and politicians believed COVID-19 “harmless,” the more challenging it became to sell the need for expanded benefits.

If people were convinced the answer to the economic calamity caused by COVID-19 was to open up 100% or “LIBERATE MICHIGAN!” as President Trump tweeted, they would no longer support expanded unemployment. The solution to these people was for Americans to suck it up and get back to work.

Where We Are Today

Through many months of suffering and unemployment, a medical miracle vaccine became available. As of May, half of the US adult population is now fully vaccinated. States are now letting COVID-19 mitigation protocols sunset because of this.

Likewise, fewer people are now collecting unemployment and the adjusted $300 provided by the FPUC. For many, life is finally returning to normal. It is not as if the people of America can now live as if the pandemic never happened. What’s emerged is a new normal.

Part of this new normal is a reworked labor market for employers and employees. The economy transformed from a job shortage to a so-called labor shortage in a few months. Though Americans are now on the move for the first time in a year and a half, ready to travel and spend money, many businesses find themselves unable to handle the demand.

What’s happening here? Unfortunately, it depends on who you ask. US Chamber of Commerce President and CEO, Suzanne Clark, calls this worker shortage a national economic emergency, but two sides of the argument have very different ideas about the cause.

Some people are quick to blame expanded unemployment benefits. They claim the extra $300 per week disincentivizes Americans to return to work. Others say the post-pandemic labor market woes are due to a wage shortage.

The Reagan Legacy

Ronald Reagan became President of the United States in 1981. His victory signaled a drastic conservative shift in US domestic policy. During a 1986 news conference, Reagan said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”

According to Reagan, the government was a destructive force for its citizens. Social programs like the 2020 FPUC hindered economic progress and led to unintended consequences. The answer for struggling Americans wasn’t more government help, but less.

The primary argument made by Reagan revolved around the Welfare Queen myth. According to Reagan, hardworking Americans subsidize those who collect government assistance. These welfare queens didn’t work but lived a high life on food stamps and other government programs while the rest of us work.

The legacy of Reagan’s myth lives on with those who blame the current “worker shortage” on the extra $300 per week of unemployment. According to these people, many American workers are lazily sitting at home collecting money.

The Modern Labor Fight

The US federal minimum wage is currently $7.25 per hour. The federal minimum wage for tipped employees is $2.15 per hour. Though some states raised these wages through legislation, the federal minimum wage hasn’t risen in almost 12 years for hourly workers. For tipped workers, the federal minimum wage stagnated for the last 25 years.

Efforts to raise both wages died in Congress earlier this year, and there appears to be little hope for revival.

Progressive economists, worker advocacy groups, and labor unions maintain that the labor market is not experiencing a worker shortage but a wage shortage. If businesses want to attract workers, they have to figure out how to pay more and offer better benefits packages.

The shining example of this theory is Klavon’s Ice Cream Parlor in Pittsburgh. This small business, like many others, struggled to find workers as restrictions eased. They then raised their starting wage to $15 per hour; the exact wage advocates believe the federal minimum wage should be.

After announcing their new starting wage, applications rolled in. Klavon’s filled every open position, and saw a spike in employee morale and revenue.

Businesses must raise wages to attract workers, and according to these folks, solving the worker shortage is that simple.

The Hidden Vigorish

The leisure and hospitality businesses were subject to some of the most stringent COVID-19 mitigation efforts. Many states banned indoor dining last winter and reduced restaurant service to takeout only. Workers in this sector lost their jobs in massive numbers, and many business owners claim they’re having trouble finding competent workers to fill open positions.

As capacity and service restrictions sunset, the National Restaurant Association estimated 1.4 million restaurant and leisure industry job openings in April. Though May saw an employment spike, the industry remains 450,000 jobs below pre-pandemic levels. Restaurants across the country are unable to staff or fully open due to this lack of workers.

The debate between the Reaganites and progressive activists ignores many issues related to the restaurant worker shortage.

Hospitality Workers are Skilled Labor

Servers, bartenders, and cooks aren’t classified as skilled labor even though these workers have a specific skill set. Unemployed citizens who work in other industries and have never worked a shift waiting tables or cooking in a commercial kitchen will not apply for these positions.

On the flip side, business owners in these industries are hesitant to hire people without any experience. Restaurant and bar owners want to hire experienced workers who don’t need the training and years of informal apprenticeship required to perform these jobs.

Workers Left the Industry

The hospitality industry is notorious for its low wages and lack of employee benefits. Faced with mounting uncertainty, many workers left the workforce during the pandemic. These experienced workers now use their skills in customer service and grocery retail.

Though they may not make as much money as they would during a restaurant shift, customer service and grocery positions offer better benefits, hours, and scheduling previously unavailable. 

Pre-Pandemic Issues

Restaurant labor issues pre-pandemic were drastic and systemic. COVID-19 mitigation efforts only exacerbated the poor working conditions both tipped and hourly employees face.

Low hourly wages for tipped employees leave them exposed to harassment from both the management and the public. A 2014 Restaurant Opportunities Center study found that 90% of women and 70% of men claim they’ve experienced sexual harassment while on the clock. 

For years, the very nature of working for tips left employees in a vulnerable position. Once they were laid-off, many workers reconsidered their careers. As they received little to no care from their employers during the initial portion of the pandemic, many of these once dedicated workers no longer feel any loyalty to return.

Is There a Worker Shortage?

Pundits and politicians can’t agree, and that shouldn’t be shocking. For some, eliminating the expanded unemployment benefits will get people back to work.

For others, it’s a matter of increased wages and benefits. Though both will help incentivize workers, industries face a worker shortage that may not end until the market constricts.

The American worker, however, has a better bargaining position than in the last five decades.

Do you need more business news? Make sure to check out the rest of our page.

Every politician and armchair economist has their theory. None of them get to the bottom of this current economic calamity.

Is there even a worker shortage? There’s much debate on that. Read on to learn more about the state of the US labor market and why many American industries now struggle to find workers.

Initial Pandemic Impact

March 2020 was an economic calamity the likes of which Americans hadn’t seen since the Great Depression. From March to May, 38.6 million Americans filed for unemployment, a quarter of all American workers.

Due to the unprecedented crisis, US Congress acted fast. They passed the Families First Coronavirus Response Act. This bill, signed into law by President Trump, included many aid mechanisms designed to protect workers and businesses.

Less than ten days later, the Coronavirus Aid, Relief, and Economic Security Act (CARES) became law. These two combined bills offered:

  • Emergency Paid Sick Leave to all workers employed by companies with less than 500 workers
  • Paid Family Leave to all workers employed by companies with less than 500 workers
  • 100% tax credits for companies now required to provide paid leave
  • Funding for state unemployment systems to handle claims
  • Food assistance program funding
  • Expanded eligibility for unemployment compensation
  • Pandemic Unemployment Assistance (PUA) for self-employed workers
  • The Federal Pandemic Unemployment Compensation program that offered unemployed workers $600 per week

This swift action provided unemployed citizens a much-needed lifeline. Even still, many workers fell through the cracks. Workers waited weeks and months for their unemployment claims.

Politicization

Though Congress acted during the opening weeks of the pandemic, politics followed. As this happened, our society could no longer agree on COVID-19 mitigation efforts.

Citizens and legislators protested lockdowns and masks. The more people and politicians believed COVID-19 “harmless,” the more challenging it became to sell the need for expanded benefits.

If people were convinced the answer to the economic calamity caused by COVID-19 was to open up 100% or “LIBERATE MICHIGAN!” as President Trump tweeted, they would no longer support expanded unemployment. The solution to these people was for Americans to suck it up and get back to work.

Where We Are Today

Through many months of suffering and unemployment, a medical miracle vaccine became available. As of May, half of the US adult population is now fully vaccinated. States are now letting COVID-19 mitigation protocols sunset because of this.

Likewise, fewer people are now collecting unemployment and the adjusted $300 provided by the FPUC. For many, life is finally returning to normal. It is not as if the people of America can now live as if the pandemic never happened. What’s emerged is a new normal.

Part of this new normal is a reworked labor market for employers and employees. The economy transformed from a job shortage to a so-called labor shortage in a few months. Though Americans are now on the move for the first time in a year and a half, ready to travel and spend money, many businesses find themselves unable to handle the demand.

What’s happening here? Unfortunately, it depends on who you ask. US Chamber of Commerce President and CEO, Suzanne Clark, calls this worker shortage a national economic emergency, but two sides of the argument have very different ideas about the cause.

Some people are quick to blame expanded unemployment benefits. They claim the extra $300 per week disincentivizes Americans to return to work. Others say the post-pandemic labor market woes are due to a wage shortage.

The Reagan Legacy

Ronald Reagan became President of the United States in 1981. His victory signaled a drastic conservative shift in US domestic policy. During a 1986 news conference, Reagan said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”

According to Reagan, the government was a destructive force for its citizens. Social programs like the 2020 FPUC hindered economic progress and led to unintended consequences. The answer for struggling Americans wasn’t more government help, but less.

The primary argument made by Reagan revolved around the Welfare Queen myth. According to Reagan, hardworking Americans subsidize those who collect government assistance. These welfare queens didn’t work but lived a high life on food stamps and other government programs while the rest of us work.

The legacy of Reagan’s myth lives on with those who blame the current “worker shortage” on the extra $300 per week of unemployment. According to these people, many American workers are lazily sitting at home collecting money.

The Modern Labor Fight

The US federal minimum wage is currently $7.25 per hour. The federal minimum wage for tipped employees is $2.15 per hour. Though some states raised these wages through legislation, the federal minimum wage hasn’t risen in almost 12 years for hourly workers. For tipped workers, the federal minimum wage stagnated for the last 25 years.

Efforts to raise both wages died in Congress earlier this year, and there appears to be little hope for revival.

Progressive economists, worker advocacy groups, and labor unions maintain that the labor market is not experiencing a worker shortage but a wage shortage. If businesses want to attract workers, they have to figure out how to pay more and offer better benefits packages.

The shining example of this theory is Klavon’s Ice Cream Parlor in Pittsburgh. This small business, like many others, struggled to find workers as restrictions eased. They then raised their starting wage to $15 per hour; the exact wage advocates believe the federal minimum wage should be.

After announcing their new starting wage, applications rolled in. Klavon’s filled every open position, and saw a spike in employee morale and revenue.

Businesses must raise wages to attract workers, and according to these folks, solving the worker shortage is that simple.

The Hidden Vigorish

The leisure and hospitality businesses were subject to some of the most stringent COVID-19 mitigation efforts. Many states banned indoor dining last winter and reduced restaurant service to takeout only. Workers in this sector lost their jobs in massive numbers, and many business owners claim they’re having trouble finding competent workers to fill open positions.

As capacity and service restrictions sunset, the National Restaurant Association estimated 1.4 million restaurant and leisure industry job openings in April. Though May saw an employment spike, the industry remains 450,000 jobs below pre-pandemic levels. Restaurants across the country are unable to staff or fully open due to this lack of workers.

The debate between the Reaganites and progressive activists ignores many issues related to the restaurant worker shortage.

Hospitality Workers are Skilled Labor

Servers, bartenders, and cooks aren’t classified as skilled labor even though these workers have a specific skill set. Unemployed citizens who work in other industries and have never worked a shift waiting tables or cooking in a commercial kitchen will not apply for these positions.

On the flip side, business owners in these industries are hesitant to hire people without any experience. Restaurant and bar owners want to hire experienced workers who don’t need the training and years of informal apprenticeship required to perform these jobs.

Workers Left the Industry

The hospitality industry is notorious for its low wages and lack of employee benefits. Faced with mounting uncertainty, many workers left the workforce during the pandemic. These experienced workers now use their skills in customer service and grocery retail.

Though they may not make as much money as they would during a restaurant shift, customer service and grocery positions offer better benefits, hours, and scheduling previously unavailable. 

Pre-Pandemic Issues

Restaurant labor issues pre-pandemic were drastic and systemic. COVID-19 mitigation efforts only exacerbated the poor working conditions both tipped and hourly employees face.

Low hourly wages for tipped employees leave them exposed to harassment from both the management and the public. A 2014 Restaurant Opportunities Center study found that 90% of women and 70% of men claim they’ve experienced sexual harassment while on the clock. 

For years, the very nature of working for tips left employees in a vulnerable position. Once they were laid-off, many workers reconsidered their careers. As they received little to no care from their employers during the initial portion of the pandemic, many of these once dedicated workers no longer feel any loyalty to return.

Is There a Worker Shortage?

Pundits and politicians can’t agree, and that shouldn’t be shocking. For some, eliminating the expanded unemployment benefits will get people back to work.

For others, it’s a matter of increased wages and benefits. Though both will help incentivize workers, industries face a worker shortage that may not end until the market constricts.

The American worker, however, has a better bargaining position than in the last five decades.

Do you need more business news? Make sure to check out the rest of our page.

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