It has always been a formidable goal of any forward thinking government to achieve full employment. The benefits are many including a larger tax base, a better socially adjusted society, and a much healthier business environment. In fact, it has always been the role of government to incentivize people to go to work. Now, in what we all hope is the waning days of the pandemic, there is a huge demand for workers but while that may be the good news, the bad news is that many workers got use to the idea of staying home and do not seem to be in a hurry to go back to work. If this sounds strange, for the moment it is a growing crisis and a real dilemma for the business community.
The situation has gotten so that companies are increasingly desperate to hire but cannot seem to find the laborers. One major reason is that the workers have become comfortable with enhanced unemployment benefits which means that in addition to the regular unemployment insurance benefits, the workers receive additional federally funded benefits on top of that. For many workers that amount to better pay than they would ordinarily get on their job, perhaps because it will be less costly for childcare when they are at home, and some are just not comfortable to return to a work environment while Covid-19 is still a concern.
All this may change as many states are set to end the enhanced unemployment benefits in the coming months because the federal program is about to run out. The official number of unemployed Americans is 10.1 million, according to the Labor Department with an unemployment rate of 6.3 percent. The emergency legislation, the recently passed CARES Act, was designed to help businesses and workers hurt by coronavirus shutdowns, including through $600 checks to people who can’t work or who were laid off. This meant that in New York State, an unemployed worker can get as much as $1104 a week and more than $57,000 if annualized. Federal benefits expire on July 31 and require Congress to extend them, while New York state benefits continue for 39 weeks from the date they start.
For small businesses this has been a devastating experience as it has become almost impossible to find people who are willing to work. A woman in her early 60’s who owns a small gift shop near Philadelphia could not find someone to help her wrap and ship the gifts, many of which were ordered on-line. Without that help, her business was virtually at a standstill and she told the local newspaper that it would force the eventual closure of her business.
The New York Post carried the story of Beatty’s Northeast Commercial Sharpening company, which provides knife- and equipment-sharpening services to hospitals, schools, restaurants, and grocery stores. It was notified on April 9th that it is now deemed an essential business, giving it an opportunity to rehire some of the workers it had laid off due to the pandemic. The problem: Her seven drivers, who have been receiving unemployment checks, do not want to resume their routes, she told The Post. Her drivers earn between $750 and $850 a week compared to the $1,000 or so in unemployment checks they are now receiving.
A second story the Post carried involved Matthew Tully, an owner of the law firm Tully Rinckey, which has 11 offices, including in Manhattan. He said his company has suffered multiple defections in recent weeks due to the CARES stimulus. Three employees providing support services to the firm — and earning salaries in the low $40,000 range — resigned within the past two weeks, Tully said. And one job candidate, who had been laid off from her previous job at a law firm, turned down his offer of $45,000, even though it amounted to a $3,000 bump-up, Tully said. In a strange way the government became a direct competitor to these small businesses in much the same way a competitor hires away a worker from a competing company by paying that worker more.
Sure, there might be a solution for companies who up the ante and pay the workers more than the unemployment benefits, but many are simply not prepared to take the step out of fear that the incentive compensation will become the new base salary, which would wreak havoc with their budgets. But stimulus checks are seen by economists as a stopgap measure, with the real test coming when the economy reopens. It is certainly not a stopgap when it becomes permanent.
So, the major challenge for industry and for the government is how to incentivize workers to go back to work without breaking the bank. At the moment, the big question for workers is “why should I go back to work.” Some companies have come up with creative solutions. For example, one company unwilling to tinker with the salary is offering signing bonuses when returning to work. In one case, it was a one-time payment of $2500.
Another company offered an all-expense paid vacation to the Bahamas. The companies say that for the ‘fence sitters” or workers who really want to come back to work, these bonus incentives were enough to push them over the top. Yet another company was banking on the fact that the employees missed the work environment such as the camaraderie, company picnics, birthday parties and other special events. The company put together a video entitled “wish you were here,” but the results were poor. Only a handful took the bait and returned while the company was attempting to return some 150 workers. Said one worker who admitted that she loves her job: “but money talks!”
This dilemma should not be confused with those workers that got used to the idea of working from home. In most cases, there was a healthy level of productivity, albeit that many will tell you, nowhere as near as working in the office. This is about stay at home people who do not do any work for their employers. In the coming weeks and months Congress may very well take another stab at some form of stimulus. Instead of making a dent in the unemployment rate, more workers may opt to stay at home.
This period may very well be historic as it seems that the government is actually incentivizing people not to work. It may very well be short-lived but in the meantime, you can read signs all over town that says: “Looking for workers!” Strange but a sign of the times!