The Economist July 25th 2020 pp18 United States | Work and Incentives | “One-handed economics”. “Unemployment benefits are not yet discouraging people from job-searching”.
If you’re paying attention some are saying the Cares Act-basic benefit and the pandemic-boost in Unemployment Insurance (UI) are creating a disincentive for those seeking work. No doubt these benefits are seemingly generous but these data are based on historically low wages* and don’t account for employer-supplemented benefits.
Let’s say for sake of argument that the Cares and UI checks are too high. Why then would workers seek a job?
First, “jobs are tied to health care and retirement programs”. Taking a few more UI checks versus having a long-term role with benefits is not logical.
Second, in some states, if an applicant refuses a suitable job their UI benefits are terminated.
Third, employers aren’t struggling to fill openings and in fact vacancies are at their lowest level “since 2014”. Also …”small hospitality and retail firms” report that “Applicants per job doubled in early April.
Fourth, if firms were unable to quickly fill roles, wage offers and wages would be rising. Wage reports are paradoxically high but that reflects loss of low wage jobs.
Economists agree, which is rare, that “employment growth is currently constrained more by firms’ lack of interest in hiring that people’s willingness to work at prevailing wages.”
Note: * adjusted for inflation wage-earnings have not increased in the last ei
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