Unemployment benefits not seen as major driver in labor shortage

Labor shortages are one of the perplexing topics as we struggle to emerge from the pandemic. The assumption had been that as the economy started to open, everyone who had been laid off would quickly return to their old jobs and things would ramp right back up. In many sectors, that doesn’t seem to be happening. One theory is that the efforts to stimulate the economy during the Trump and now the Biden administration have disincentivized work.

So what’s really going on? New Ipsos data shows a much more complicated picture.

Labor shortage are hampering the recovery as stores are forced to cut hours and restaurants struggle to fill shifts. Even as the unemployment rate falls, millions of job openings remain unfilled.

Now many states are taking step to roll those efforts back and force people back to work. A Politico piece headlined “America’s vanishing workforce,” notes that “At least 14 states… have moved to cut off enhanced federal jobless benefits that were supposed to last until September. Florida is among roughly 30 states reinstating a requirement that the unemployed prove they are looking for work to receive state benefits.” Some companies are offering rewards for new employees or hiking wages. Others are temporarily boosting recruiting bonuses for staff.

In the most recent wave of the Ipsos Consumer Covid Tracker, questions were put to both the potential labor force (essentially those who report they are full-time, part-time or unemployed – the non-retired). The employed population, of course, could be potentially also in the job market, looking to move as the economy opens back up. The majority of full-time workers (55%) say they are satisfied with their current jobs and not looking for a new role. Fewer than one in ten full-time workers say they are looking for additional jobs. Another third say they are either actively looking for a new role or are willing to entertain a new offer if something came up.

Of this non-retired population, only 11% overall, and roughly three in ten of those unemployed, say that they are unable to or uninterested in looking for work. Among that group, a plurality say they are unable to look for work due to illness or disability.

To dig deeper into that 11% we clearly start running into issues of small samples sizes – which is interesting in itself due to the attention being paid to this as the main root of open job postings. But what we see is that by far the biggest reason given why people aren’t looking for work is that they are unable to due to illness or disability. A distant second is inability to work due to childcare needs.

"The ongoing labor shortage, or even the extent of it, is a critical issue for business and government to solve as we begin to re-emerge from the pandemic,” said Mallory Newall from Ipsos’ Public Affairs division. “But our data show that the partisan talking points about unemployment benefits and government aid mask the complicated and diverse set of reasons why aren't in the workforce today. In fact, earning too much on government programs doesn't seem to be a major driver."

Only a handful of the unemployed, which is then less than 1% of the overall potential labor force say they are making more money on government programs than they would at work.

Which leaves us with the question of what impact ceasing the expanded unemployment benefits will have on the job market, vs. what impact it will have on the economy as many unemployed workers lose a piece of their income.