I suspect if the UI bonus was made permanent, it would become a default minimum wage hike.
My brother-in-law, who owns a fast food joint, is having problems getting workers. But I also know, it’s partly because he doesn’t wanna pay what he needs to pay.
The whole thing sort of makes me torn.
One thing I thought about, which I don’t see mentioned a lot is that the hiring wage needs to be a decent amount higher than the UI rate.
For instance, in Idaho the UI is 448 + 300. Or 748 total. Which works out to $19 an hour. Which is way more than the typical restaurant salary.
If I was making $19 an hour staying home, I’m not gonna take a job unless I’m making $22 or $23 an hour.
Previously someone who earned $10 an hour would of receive reduced benefits, but right now I believe everyone gets max.
Quite frankly, if it wasn’t a family business, my wife would of stayed on UI benefits. She’s actually losing money by going to work.
Nice column Noah! Do you think that the feds and the state DOL could actually implement a UI bonus before its usefulness has passed? Many state UI agencies did not distinguish themselves during the pandemic. I recognize that it is normative in economics to ignore such implementation issues, but ...
Agreed with Ken. The economic assessments make sense, but the opinions around vaccinations and the political right seemingly keeping the country behind ruined the article for me.
This is coming from an European who has little interest nor skin in the game with relation to the US' politics. I believe we've all had enough of authors virtue signalling their beliefs with little sprinkles throughout otherwise well-written pieces.
Purely anecdotal but I know couples who have decided that one member of the couple is not going back to work after UI ends or even WFH. Covid showed them how costs could be lower with a different lifestyle - no need for 2 cars, not as many meals out, local travel instead of a trip to Europe and the big one savings on childcare. I think it will take much higher wages to get some of these people back to work.
Your economic assessments make sense. Vaccinating kids for a virus that doesn’t harm them makes no sense. I also don’t understand the requirement that everybody get vaccinated. People at risk should consider it, those who aren’t - maybe as well, but certainly not young people lacking comorbidities, or kids. Note that I did get the vaccination (57 years old, no co-morbidities, but I travel a lot). I’d appreciate more on why _everybody_ needs to be vaccinated. I don’t see the need.
Looking at the data before seasonal adjustment (https://fred.stlouisfed.org/series/PAYNSA) I stand corrected; it's clear last year's odd numbers were properly excluded from seasonal adjustment. The issue is that April is typically a very big month for hiring. This April was also, nearly 1.1m net nonfarm jobs added, on par with the strong April 2018 and April 2019 numbers. Remember that we were in a fiscally juiced late cycle before Covid hit, with a 2m/year pace of net job gains and low unemployment. There is no we can get back to that pre-Covid job-gains trend without either a lot of wage hiking or a lot more immigration.
Daily covid cases are still higher or equal to September as shown in your graph and it looks like there is no substantial fall in cases over the near-term.
Is it possible that signing bonuses/wage-subsidies and the removal of UI will discourage businesses from taking precautions to keep their workers safe from covid?
I can see why businesses might be holding out on the wage hike. The PUI is temporary. Any wage hikes will likely be permanent, at least for the employees hired at that wage.
Are there any Real Economics Papers™ about employers' "wage stickiness" like this? Similar situations in the past? Lessons learned? That kind of thing?
My family runs a tool-and-die shop in Northern Ohio. They and every other firm with whom they do business are struggling to fill vacancies because a substantial fraction of those laid off at the beginning of the pandemic are, after Ohio's baseline UI benefits and the extra $300/month from the USA, earn more income by not working than they ever did or could working.
You don't need some fancy regression-discontinuity or natural experiment to know that if you pay people not to work, they'll choose not to work.
I don't think hiring has slowed much if any. This looks more like seasonal mis-adjustment from robotic comparison to last year's monthly job numbers.
The people in Pandemic UI aren't such a huge portion of the labor force. And a very big portion of them were self-employed and will be going back to that, not entering the low-paid job market.
I suspect if the UI bonus was made permanent, it would become a default minimum wage hike.
My brother-in-law, who owns a fast food joint, is having problems getting workers. But I also know, it’s partly because he doesn’t wanna pay what he needs to pay.
The whole thing sort of makes me torn.
One thing I thought about, which I don’t see mentioned a lot is that the hiring wage needs to be a decent amount higher than the UI rate.
For instance, in Idaho the UI is 448 + 300. Or 748 total. Which works out to $19 an hour. Which is way more than the typical restaurant salary.
If I was making $19 an hour staying home, I’m not gonna take a job unless I’m making $22 or $23 an hour.
Previously someone who earned $10 an hour would of receive reduced benefits, but right now I believe everyone gets max.
Quite frankly, if it wasn’t a family business, my wife would of stayed on UI benefits. She’s actually losing money by going to work.
Nice column Noah! Do you think that the feds and the state DOL could actually implement a UI bonus before its usefulness has passed? Many state UI agencies did not distinguish themselves during the pandemic. I recognize that it is normative in economics to ignore such implementation issues, but ...
Agreed with Ken. The economic assessments make sense, but the opinions around vaccinations and the political right seemingly keeping the country behind ruined the article for me.
This is coming from an European who has little interest nor skin in the game with relation to the US' politics. I believe we've all had enough of authors virtue signalling their beliefs with little sprinkles throughout otherwise well-written pieces.
Purely anecdotal but I know couples who have decided that one member of the couple is not going back to work after UI ends or even WFH. Covid showed them how costs could be lower with a different lifestyle - no need for 2 cars, not as many meals out, local travel instead of a trip to Europe and the big one savings on childcare. I think it will take much higher wages to get some of these people back to work.
I kept reading "UI" as "User Interface". :/
Your economic assessments make sense. Vaccinating kids for a virus that doesn’t harm them makes no sense. I also don’t understand the requirement that everybody get vaccinated. People at risk should consider it, those who aren’t - maybe as well, but certainly not young people lacking comorbidities, or kids. Note that I did get the vaccination (57 years old, no co-morbidities, but I travel a lot). I’d appreciate more on why _everybody_ needs to be vaccinated. I don’t see the need.
Looking at the data before seasonal adjustment (https://fred.stlouisfed.org/series/PAYNSA) I stand corrected; it's clear last year's odd numbers were properly excluded from seasonal adjustment. The issue is that April is typically a very big month for hiring. This April was also, nearly 1.1m net nonfarm jobs added, on par with the strong April 2018 and April 2019 numbers. Remember that we were in a fiscally juiced late cycle before Covid hit, with a 2m/year pace of net job gains and low unemployment. There is no we can get back to that pre-Covid job-gains trend without either a lot of wage hiking or a lot more immigration.
Daily covid cases are still higher or equal to September as shown in your graph and it looks like there is no substantial fall in cases over the near-term.
Is it possible that signing bonuses/wage-subsidies and the removal of UI will discourage businesses from taking precautions to keep their workers safe from covid?
I can see why businesses might be holding out on the wage hike. The PUI is temporary. Any wage hikes will likely be permanent, at least for the employees hired at that wage.
Why the title change?
The third shift at the local Waffle House walked out en-masse Saturday morning last week. Local PD found the place unlocked and unattended at about 3am. Even the day shift is having trouble getting people, and Waffle House isn't the only one. South Carolina's response is to end the Pandemic UI as of June 30 "to address workforce shortages". https://governor.sc.gov/news/2021-05/south-carolina-return-pre-pandemic-unemployment-program-address-workforce-shortages
I find myself hoping all those people getting it right now have put some of it away so they can't be forced back to work immediately
Are there any Real Economics Papers™ about employers' "wage stickiness" like this? Similar situations in the past? Lessons learned? That kind of thing?
From a sample size of one:
My family runs a tool-and-die shop in Northern Ohio. They and every other firm with whom they do business are struggling to fill vacancies because a substantial fraction of those laid off at the beginning of the pandemic are, after Ohio's baseline UI benefits and the extra $300/month from the USA, earn more income by not working than they ever did or could working.
You don't need some fancy regression-discontinuity or natural experiment to know that if you pay people not to work, they'll choose not to work.
I don't think hiring has slowed much if any. This looks more like seasonal mis-adjustment from robotic comparison to last year's monthly job numbers.
The people in Pandemic UI aren't such a huge portion of the labor force. And a very big portion of them were self-employed and will be going back to that, not entering the low-paid job market.