We hope that the July jobs report will put an end to claims that the extra pandemic-related federal unemployment benefits were keeping people from going back to work.
That talking point, which Republicans across the country used as justification for cutting off those extra benefits ahead of their scheduled phase-out in September, was one of those simple claims that seemed self-evident at first glance, but which quickly evaporated under scrutiny.
Turns out, two analyses of jobs and payroll data show that states that continued to accept the extra federal benefits for their residents saw bigger gains in new employment than those states that ended benefits early. Other studies had reached similar conclusions following the June jobs report. In fact, according to an analysis by Homebase, an employee management firm, those states that ended federal benefits early saw job numbers decline by 0.9 percent in July, while states that kept receiving the benefits saw employment increase by 2.3 percent.
While some might find those results surprising, they are perfectly consistent with standard economic theory. The U.S. economy is overwhelmingly fueled by consumer demand, which generates about 70 percent of total gross domestic product. The extra federal benefits put more money in the hands of families in which at least one breadwinner was unemployed. In other words, the extra money went to families that were likely to spend it, boosting their local economy in the process. That, in turn, gave businesses more incentive to hire new workers, and they did, to the tune of nearly one million in July alone.
What this demonstrates, more than anything, is that there are no easy answers when it comes to our current worker shortage. If businesses here in northeastern Minnesota are hoping for an increase in the workforce after the phase-out of the extra federal benefits next month, they are likely to be sorely disappointed.
That’s why the discussion in Ely about the community’s acute worker shortage is important. The shortage isn’t going away next month, or next year, unless we begin to get serious about addressing the barriers in the workforce and begin to realistically look at allowing more workers to enter the country.
As of the end of May, there were 9.21 million posted job openings in the U.S. according to the Bureau of Labor Statistics, and yet we were paying hundreds of millions of dollars to house tens of thousands of refugees from south of the border who want nothing more than a job in America. At some point, we need to connect the dots by returning to an immigration system that provides opportunity for more people.
The rapid aging of our population is another reason we need to open up our immigration system. According to Brookings, the latest census data shows that the number of people in the U.S. over age 55 grew by 27 percent between 2010 and 2020. The population of those under 55, by contrast, grew by just 1.3 percent over the decade. Businesses are struggling to find workers because our workforce is literally shrinking as ever more of us age out of the workforce without replacements to fill the gaps. There has been much consternation about the current, relatively low workforce participation rate. But that rate is going to continue to decline simply as a matter of demographics unless we figure out a way to bring more workers here.
Sadly, this obvious need is facing pushback from those who fear that those new workers might come from “s___hole countries” as our former president so ineloquently put it. While the former president said he wants more people from Norway (read: white), that’s not going to happen. Residents of most other developed countries now enjoy a higher standard of living, better work conditions, more vacation, greater upward mobility, and far more affordable health care access than even gainfully employed Americans. Why would they choose to leave their homes to come here? For the developed world, America is no longer seen as a land of opportunity. It could still provide opportunity for residents of lesser-developed countries.
Yet bringing new workers to the area is only half the battle. They also need housing, which is in critically short supply in our communities, in part because both Washington and St. Paul have failed to make money available for this critical infrastructure in small towns. Until resources are brought forward to help fund the gap between the cost of building new housing and the revenue that can be generated from rents that are affordable to residents of small communities, this problem will only get worse. If we want more workers for our businesses, we need more people in the workforce and we need places for them to live in our communities. Until those things happen, there’s not much hope for addressing our worker shortage.