Fed President: Unemployment Benefits Not Alone In Causing Worker Shortage

You can find the hiring signs everywhere.

As the economy keeps growing after the lifting of COVID-19 restrictions, demand for workers has consistently outpaced the number of people willing to take those jobs.

The current jobs opening rate is at its highest in more than 20 years, but there are still seven million fewer people employed now than before the pandemic, Tom Barkin, president and CEO of the Federal Reserve Bank of Richmond, told members of the North Carolina Economic Development Association on Wednesday.

That translates to roughly one open job for every unemployed worker in the U.S., Barkin said, and the pandemic has created a complicated environment for hiring for myriad reasons, including workers struggling to find child care and a high number of retirements.

But Barkin was hesitant to blame increased unemployment benefits as the main reason employers are struggling to hire. Those benefits have become a go-to complaint for many business owners who have struggled to get staffing back to pre-pandemic levels.

“What’s the story here?” Barkin said of the number of job openings. “Part is a drop in participation, particularly from parents with elevated care responsibilities and from three times the normal level of retirements. ... Perhaps additional stimulus payments and reduced spending are giving workers the financial wherewithal to be selective — on pay, industry, working conditions or health risks.”

Barkin’s comments came during a question-and-answer session with members of the N.C. EDA.

Barkin helps oversee a Federal Reserve district that includes North Carolina, South Carolina, Maryland, Virginia, Washington, D.C., and West Virginia. He is also a member of the Federal Open Market Committee, which determines the country’s monetary policy, like setting interest rates and determining the growth of the U.S. money supply.

He noted he recently traveled around South Carolina, which ended many unemployment programs in June, and found its employers were struggling just as much as companies in other states that hadn’t ended those programs.

“I really don’t hear the story of a different labor market in South Carolina than Virginia or North Carolina,” he said. “I just don’t hear that yet.”

It’s a bigger story than just that, he said, especially for employers who have been paying wages around the federal minimum wage of $7.25 per hour.

While the minimum wage hasn’t been hiked in more than a decade, market pressures are changing the reality of wages on the ground. Larger employers, who also have a lot of openings, are offering workers more avenues to earning at least $15 an hour.

“Really big employers that are highly visible, like McDonald’s and Coca Cola and Walmart and Amazon, announced $15 an hour entry or $15 an hour average,” he said.

“So if you were someone who was working at a fast food restaurant and making, I don’t know, $11 an hour and you’re getting called back to that restaurant,” he added, “...why would you take an $11 job? Why wouldn’t you go try to get that $15 job? And so I think that’s what’s happening at a really broad scale.”

Barkin said you can’t discount that many restaurant and retail employees were laid off by their employers when the pandemic initially hit. Millions of people who had been working these jobs for years all of the sudden found themselves at home for months.

Then March came along, and many of those employers suddenly were trying to rehire the same people they laid off.

But those workers “had moved on, some to Amazon distribution centers and Walmart distribution centers, which are opening up,” he said. “People went back to school and retrained in technology and other places. People went to health care.”

He noted that many workers finally had a chance to take stock of their careers when they were laid off. On a visit to Hickory last year, Barkin said, he heard from several former furniture manufacturing workers who all told their kids to never work in manufacturing because of the threat of layoffs.

“Well, I think people who got laid off from a bar or restaurant might have told themselves, ‘Why am I in that industry? I’m going to get into another industry,’” Barkin said. “The economy is pretty hot and the job market’s pretty hot, so they’ve gotten into those.”

But Barkin does believe stimulus checks, rent moratoriums and unemployment benefits are giving those workers more time to find those higher paying jobs.

“The (employers) who are suffering the most are people who pay less than $15 (an hour), and people who have jobs that you know frankly are not very attractive jobs, whether it be working conditions or health risk or exposure to angry customers if you’re talking about waitstaff in a restaurant,” he said. “Those are the places that are struggling. ... But it’s not as a simple as the unemployment insurance story.”

He said if workers continue to hold out for higher-paying jobs, these low-paying employers might have to rethink their salary structures.

“If labor supply doesn’t recover strongly in the fall, then employers are likely to face a need to reassess their entry compensation as well as internal wage compression,” he said. “This would affect businesses broadly and is one more way that transitory (inflation) pressures can become more permanent.”

This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate.

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