There were more than 30,000 individuals out of work but actively seeking work within the Louisville region in March. Even so, we are hearing from employers that they are unable to fill open positions and are scrambling to find workers. What is causing the disconnect between the unemployed and available job openings?
Part of the problem might be that there aren’t enough individuals seeking work to create good matches for available job openings. The size of the labor force, which only includes those working or out of work but actively seeking work, was 3% smaller in March 2021 as compared to March 2020. This amounts to more than 20,000 workers who were either working or actively seeking work in March of last year, but no longer in either category in March of this year.
Some point to expanded unemployment insurance (UI) benefits as the reason there are not enough individuals looking for work. The logic is simple. With an additional $300 per week available through the UI system, why bother looking for work? Removing the expanded UI benefit would result in many individuals flooding back into the labor market. But economic studies show this logic is not as simple as it seems. Research from the University of Chicago and the JPMorgan Chase Institute looked at the impact of the additional $600 weekly benefits available to unemployed workers through the CARES Act. They found that the number of people returning to work who had access to the expanded benefits was stable throughout May and October. That is, people returned to work at the same level before the expanded benefits expired as they did after the benefits expired in July. They conclude that the impact of expanded UI benefits as a disincentive to look for work was very small. Another study that examined the impact of the extra $600 weekly benefits reached the same conclusion, that “employers did not experience greater difficulty finding applicants for their vacancies after the CARES Act, despite the large increase in unemployment benefits.”
In addition, it’s been widely reported that many unemployed Kentuckians have struggled to access their benefits through the state’s antiquated system. Data from the Census Bureau shows that 1 in 4 Kentuckians who applied for UI benefits did not receive any benefits, thereby limiting the number of out-of-work Kentuckians who are even receiving the expanded benefits.
Moreover, expanded UI benefits are good for workers. Research on the impact of expanded benefits during the Great Recession found that access to benefits for a longer period of time led to better job matches and less likelihood that a worker had to settle for being overqualified for a job, especially for women, people of color, and those with lower levels of educational attainment. During the pandemic, additional benefits decreased levels of food and housing insecurity and increased household spending, stimulating economic activity.
Data from the Census Bureau shows the primary reason why Kentuckians were not working throughout the first quarter of 2021.
The reason most cited for Kentuckians not working in the first quarter of 2021 was because they are sick or disabled. Prior to the pandemic, we highlighted how a high rate of disability among Kentucky’s population contributes to a low labor force participation rate. Employers willing to provide accommodations for people with disabilities are more likely to find a wider applicant pool.
The next most cited reason for Kentuckians not working in the first quarter of 2021 was childcare responsibilities. Last month we highlighted how women of color have faced the steepest employment losses during the pandemic, in part because they are over-represented in the service sector jobs that experienced the largest job losses, but also because women tend to shoulder the brunt of childcare responsibilities when schools and daycares are closed or operating at limited capacity. Research from the Federal Reserve Bank of San Francisco found that mothers in particular have been driven out of the labor force. It is difficult to expect a complete rebound in the labor force when many mothers are still needed at home.
Fear of getting COVID-19 is still among the top five reasons Kentuckians did not work in the first quarter of 2021. Anecdotally, this reason is supported by what we hear in the local workforce system, and was also cited in this month’s Beige Book from the Federal Reserve. This crisis has always been a public health crisis first and foremost. A robust vaccination campaign will ultimately address the root cause of the economic crisis that ensued.
Employers with open vacancies can consider whether their available positions are good jobs and what they can do to accommodate workers still facing barriers brought on by the pandemic. The Brookings Institution defines good jobs as those that provide stable hours, with a pay at or above the region’s median wage (currently $18.91 per hour) with employer-sponsored health insurance. Research shows that offering good jobs results in a larger and more capable applicant pool. (Note: If you are a company leader interested in exploring job redesign resources click here.)
Chairmen of the Federal Reserve Jay Powell remains optimistic about the long-term health of the labor market. He noted how wages are not yet moving up, which signals a tight labor market. He remarked that labor supply and demand will find its way to an equilibrium, but it might take some months to achieve. To the extent that employers were concerned about running out of workers in the last expansion, it never really happened. “The labor force participation held up. People came in the labor force. They stayed in the labor force longer than expected.” Addressing barriers like lack of childcare and the continued spread of COVID-19 will bring people who want to be working back into the labor force.
As the local workforce board, KentuckianaWorks is here to help bridge the divide between job seekers and available job openings. Through career counseling, job training, and direct referrals to employers, the services available in the workforce system will help reduce the mismatch between those out of work and those seeking to fill positions.
