By David M. Greenwald
They are calling it the great resignation – large numbers of people have left the workplace and not returned. Numerous reports have noted what appears as labor shortages despite the fact that overall employment remains well below pre-pandemic levels. Some studies are suggesting this might be permanent.
Some have blamed this on the enhanced unemployment benefits that they said were reducing the incentive to accept jobs – but those extra benefits have long since expired in almost all states and has not triggered a change in employment or labor force participation.
A story in CNET this week finds: “Historically low unemployment claims, historically high quit rates, millions of baby boomers suddenly retiring. All of it is remaking work in America.”
Moreover, the experts they talked to believe it is here to stay.
“Experts say all of this will likely continue far into 2022 and beyond,” CNET reports. “Already, the numbers are staggering. In April, the number of people who quit their job in a single month hit 3.8 million, an all-time record, according to the US Bureau of Labor Statistics. In August, it hit 4.2 million. And then September, 4.3 million.”
They are quitting their jobs and not filing for new unemployment claims either, belying the belief that enhanced unemployment is driving the trend. The NBLS reports the lowest number of unemployment claims in more than half a century, but there are 11 million open jobs out there.
What’s going on?
A lot of speculation.
One expert that CNET talked to merely believes that this is an extension, perhaps an acceleration of existing trends – “retiring baby boomers, low birth rates and the shift to remote work.” Julia Pollak, chief economist at employment marketplace ZipRecruiter said, “The pandemic accelerated them at least 20 to 30 years.”
Others note this is actually multiple trends at once. There is the pandemic. As I have pointed out, there is a high percentage of people who simply are high risk either due to age or preexisting condition, or they have to care for their children or others who are vulnerable to COVID. Even before Omicron, even people who are vaccinated have not been willing to take chances.
There is also a demographic trend with the pandemic encouraging those remaining baby boomers in the workforce to retire while the number of people turning 18 is shrinking.
According to CNET, “without immigrants to fill in the gaps, there aren’t enough people to replace the baby boomers who are leaving. Further, the birth rate in the US has been declining for nearly half a century, and the United Nations predicts that won’t meaningfully change for the foreseeable future.”
Pollak told CNET, “If birth rates continue declining, a tight labor market is here to stay.”
A few weeks Business Insider looked at Kentucky to understand what was behind that state’s labor shortage.
“It’s too soon to say why the so-called labor shortage keeps raging on with no end in sight, but a few theories have emerged,” they write.
They posit the following: “Childcare is keeping people home. More retired early. Workers haven’t returned yet because there’s a mismatch between the jobs open and the ones they want, and some are permanently rethinking what work means to them. In the background, the climate crisis is reshaping the economy.”
Kentucky’s quit rate “has been especially high compared to most other states during the pandemic, but it was higher than the national average long before.”
“The truth is that something has been amiss for a long time,” the Kentucky Chamber Foundation wrote in September.
Business Insider found four key drivers in Kentucky: (1) workers betting they can find another job with better pay and life-work balance; (2) kids in a state with “childcare deserts” (3) safety in an undervaccinated state, and (4) “systemic inequalities and long-term impacts from the climate crisis are holding others back.”
By the numbers Kentucky has a quit rate of 4.4 percent compared to a national rate of 2.9 percent. Moreover, labor force participation was at 56.7 or 5.1 percent below the national rate. That put Kentucky at 49th in the nation out of 51 (with DC included).
Kentucky minimum wage workers earn just $7.25 an hour, which hasn’t changed for 12 years as the federal minimum wage has not increased. Most other states have raised their minimum wage.
“Not increasing the minimum wage all those years I think really sets the state up for a big problem once workers had more leverage, as they do now,” Jason Bailey, executive director at Kentucky Center for Economic Policy, said. “Employers are having to scramble to respond.”
Childcare is another big problem. From July 2012 to 2021, the number of childcare centers declined in Kentucky by 46%. Writes the Insider, “That worsened what’s called childcare deserts, areas where the number of children outnumbered licensed care slots by at least three to one. Half of the people in Kentucky live in one. “
They note that has pushed people out of the state entirely.
They also write: “The lack of childcare centers is another consequence of the state’s low wages. Over a quarter of early childcare workers in Kentucky are earning below the poverty line.”
There is also the persistent pandemic. As of December 19, Kentucky had about 64 percent of adults fully vaccinated, compared to 72 percent nationally.
One of the more interesting findings is, “In the more vaccinated states, people flocked back to work; the same wasn’t true for the less vaccinated states, even without federal support. “
Finally, “Drugs, systemic inequality, and climate change are all separate economic crises that have been swelling under the surface of the Bluegrass state for years, and they were brought to a head by the pandemic.”
Just one measure: “Kentucky’s underlying opioid epidemic is hurting its labor market. A 2019 University of Kentucky economic analysis found the drug crisis may be reducing Kentucky’s workforce participation by 23,100 to 55,200 workers.”
While some of these factors are exclusive to Kentucky, put this all together and I think we have a decent picture. One is probably the generational change with Boomers leaving and fewer 18-year-olds replacing them. Add in reduced immigration and you have a labor shortage.
Then you have the pandemic which is combined with other factors and has reduced participation because some people do not want to risk going back to work, some people were induced to retire, and others need to take care of children and family.
Finally, low wages are probably reducing the incentive to work as well – people don’t want to deal with these other issues while making low wages.