America’s Labor Force Problem Goes Beyond Economics
- Separation from the workforce is impacting mental, physical and social health of our communities.
- Some employees are choosing to leave or refuse work to stay ahead on bills.
- Government safety-net programs must be reconfigured to move people into work for both economic & social well-being.
Originally Posted on Real Clear Politics
One legacy of the COVID-19 pandemic could be the devastation it brought to the American worker by disconnecting millions from the workforce.
New research estimates that 3 million workers plan to remain permanently sidelined over concerns of physical illness or physical impairment due to COVID-19.
The research team named this phenomenon “Long Social Distancing” and found that more than 13% of Americans who worked in 2019 plan to continue social distancing after the pandemic ends. An additional 46% will engage in limited forms of social distancing.
The study estimates the depressed labor force participation from Long Social Distancing will dampen Gross Domestic Product by 1.4%. But the impact on individuals and their families will be far worse.
Separation from the labor force obviously means less income and financial security for the individual’s future. But there are other costs from nonwork that extend beyond the financial disadvantages, including long-term mental, physical, and social health impacts for workers, their children, their families, and their communities.
Simply put, our labor force situation today is a social, mental, and community crisis in the making. That’s particularly true for the poor and working class.
Kevin discovered that work is more than a paycheck.
Kevin discovered that work is more than a paycheck.
During the pandemic, the so-called “laptop class” of professional workers fared fairly well. They were able to maintain social distance from others while still working to earn income. Many of these workers found that remote jobs allowed them to create a healthier work-life balance, so they abandoned their former desk jobs in favor of a more flexible lifestyle.
In stark contrast, working-class adults who couldn’t perform their jobs from home have been hit hard. Those who continued to work were often placed at a higher risk of COVID-19 exposure. Others suffered more because their employers shut down, resulting in a devastating loss of income. Many small business owners suffered income loss and in some cases were forced to close their businesses permanently.
According to the Long Social Distancing study, the majority of Americans who don’t plan to return to work have a high school education or less (17.6%). Unemployment tended to decrease based on both education level and income, with the highest number of labor non-participation among those who previously earned $10,000 to $20,000 per year. Nonwork was highest among females aged 50-64 (17.5%), followed by male respondents of the same age group (12.9%).
It follows, then, that the most significant impact labor non-participation will have on America lies among lower-income communities — many of whom were likely already struggling to make ends meet.
Federal stimulus programs have been important to these individuals, helping them weather the combined storm of the virus and government-imposed lockdowns and shutdowns. Although these government programs sustained many people throughout the crisis, they also created major problems as we emerge from the worst of the pandemic.
Some unemployed people found that they were better off leaving their jobs and receiving government assistance instead. In many cases, unemployment benefits paid better than the jobs they’d previously occupied. This aggravated pre-existing issues with labor force non-participation, helping to fuel inflation as work stoppages led to disruptions in the supply-chain flow of goods and services.
Worsening the problem even more, many Americans experienced so-called “benefit cliffs” where their government support, such as food stamps, fell off in response to an increase in income. In some cases, families lost government benefits after a comparatively small pay raise. This creates additional disincentives for work.
So, what’s the path forward? In order to get unemployed adults back to work, we’ll need a change in perspective. Work must be regarded as something worthwhile in itself beyond a weekly or biweekly paycheck, because it is. A steady job gives each worker a sense of purpose, provides a stable life to their families, and helps maintain mental health.
Nonwork has a direct impact on children not only in the present, but as research shows it can impact their future, too. It creates perpetuating cycles of dependency that lead to instability for the children in these homes. This creates a systemic crisis in marginalized communities. If our goal is truly to overcome generational poverty, creating a culture that uplifts and prizes work is essential.
It’s essential to address safety-net programs as part of the solution. Programs that help in the immediate aftermath of job loss are not enough. In addition to meeting immediate needs — such as unemployment assistance and food — unemployed individuals need support and encouragement to know that work is beneficial to our mental and social health.
And importantly, safety net programs cannot create disincentives from earning more money and getting ahead in society. Government programs need to be reconfigured so they no longer interfere with the upward economic mobility of individuals and their families. They need to consider the overall well-being of the recipients and their families over the long-term, not just the short-term.
Our ultimate goal should be to help those sidelined by the pandemic reconnect to work — not only for their economic health, but for their mental and emotional wellbeing.
Eviction Moratorium Expired and the House of Representatives Left Town. What now?
Late on the evening of August 3rd, 2021, the Centers for Disease Control announced it was extending its eviction moratorium for people in an area of “substantial and high transmission” of the COVID-19 virus. This was followed up by the astounding statement by President Biden that he suspected any attempt to extend the moratorium would be legally doomed even as his administration celebrated the CDC action. Nevertheless, government attorneys argued this was not an extension but rather a new order that would not be set aside by the courts.
The Supreme Court recently ruled the original policy illegal, but allowed the original deadline of July 31st to stand to give Congress a chance to act prior to the expiration of the order, if it chose to do so. In keeping with the dysfunction we’ve seen in Congress, no legislation was passed, the moratorium expired, and the House of Representatives left town.
Setting aside the legal questions surrounding the CDC’s eviction moratorium, many people across the nation are facing eviction now and will be again in 60 days when the moratorium expires. The Household Pulse Survey indicates 52,167 Georgians say they are very likely to be evicted and 155,302 say they are somewhat likely. These renters are overwhelmingly African-American and many of these families have children. Should all or most of these folks be evicted, it would be an unimaginable tragedy.
Despite $46.6 billion in federal emergency rental assistance passed into law last December and March, relatively little money has made it into the hands of people who need it. According to a press release from the U.S. Treasury, nationally only $1.5 billion was delivered to eligible households in June, which exceeded the amount delivered “for all three previous reporting periods combined.” That’s a paltry 3.2% of the funds distributed in six months.
The situation in Georgia is not much better, according to the Atlanta Journal-Constitution:“As of July 20, only about 6% of the $710 million that Georgia and select local governments received in federal aid had gone to households at risk of eviction or behind on rent.”
The U.S. Treasury is relying on state and local housing assistance agencies to reach the people in need. According to a count by the National Low Income Housing Coalition, there are 484 state and local programs charged with determining eligibility and dispensing the benefits nationwide.
The Treasury fanned out responsibility to counties and cities with populations over 200,000 plus state governments. Each governmental unit set up their own system for administering the program funds, which can be by the state agencies or county governments themselves, or through public housing authorities or non-profits charitable organizations.
In Georgia, for example, responsibility fell to 13 governmental units: Atlanta City, Augusta-Richmond County Consolidated Government, Chatham County, Cherokee County, Clayton County, Cobb County, DeKalb County, Forsyth County, Fulton County, Gwinnett County, Hall County, Henry County, and the State Department of Community Affairs.
These governmental units structured their responses differently, creating new administrative structures or funneling the money through non-profits that were quickly overwhelmed. Many people report complicated paperwork and some landlords have refused to take partial payments on back due rent.
It appears unlikely the situation for tenants will improve much before the extended eviction moratorium expires in 60 days. And we haven’t touched on the millions of small landlords who are behind on mortgage payments, taxes, and other liabilities. Sadly, this situation has the markings of a slow-moving economic and humanitarian disaster.
What can be done?
For the long term, the solution is clear. The entire fiasco could have been avoided if our vision of a fully integrated eligibility system were in place. Georgia is partially there with the Georgia Gateway that coordinates applications for food stamps, Medical assistance, child care, and two other programs. Rental assistance also needs to be part of the Gateway.
Moving forward, Georgia should continue to add additional safety net programs to its Gateway unified eligibility system. Federal housing programs are not currently part of the system. Adding these programs would allow for a much swifter determination of eligibility and distribution of emergency money in times like these.
Clearly, governments must speed up the distribution of aid money to tenants and landlords. Governments can also extend the same grace to landlords they are demanding landlords extend to tenants. Additionally, Congress should resist the urge to extend enhanced unemployment benefits and remove other disincentives to work such as the exacerbated benefit cliffs found in the emergency SNAP benefits. The problem of looming evictions will only continue to grow until more people return to work and are able to pay rent on their own.
Putting Georgia’s employment numbers in perspective
Is there any reason not to cheer? Georgia’s unemployment rate dropped to 4.1 percent in May.
Here are three reasons why this looks good for Georgia.
First, the unemployment rate is declining, giving optimism that the economy is bouncing back from the pandemic.
Second, there were only two periods in recorded history when Georgia’s unemployment rate was this low or lower. Starting from 1976—the extent of available data from the U.S. Bureau of Labor Statistics (BLS) on unemployment rates for the states—the first period was between October 1998 and July 2001 when the rate reached as low as 3.4 percent. This period occurred after the long economic expansion of the 1990s.
The other period—from April 2018 to the start of the pandemic—just occurred with Donald Trump in the White House. During this period, Georgia broke its best record by achieving 3.3 percent.
Third, Georgia’s rate is the 16th lowest in the country, beating out 34 other states. For comparison, the United States as a whole has a rate of 5.8 percent rate, considerably higher than Georgia’s.
But wait. Is the unemployment rate artificially low?
While optimism is merited, it is important to put the unemployment numbers in perspective.
Unemployment percentages do not capture those who do not participate in the labor force. According to the BLS, anyone not employed who had not actively looked for a job during the prior four weeks is not part of the labor force. Therefore, any person temporarily not looking for work is not accounted for when the BLS calculates the official unemployment rate. Especially now with all the repercussions of the pandemic, all those potential workers who have been sitting on the sidelines for the last four weeks are simply not counted.
The behavior of labor force participation is a loose link for unemployment numbers. Normally, when economic times are good, sidelined workers and even retirees come back into the labor force, which can push the unemployment rate up. When times are bad, the opposite happens. Workers drop out of the labor force, artificially lowering the unemployment rate.
During the depth of the pandemic, and as expected, the labor force participation rate in Georgia dropped—to 59.4 percent to be precise, compared to 62.9 percent just prior to the pandemic. In terms of real people, there were an estimated 260,575 fewer workers participating in the labor force—who were not counted among the unemployed, to emphasize the point. Participation bounced back some to 61.7 percent, but still there are 40,934 fewer workers in the labor force.
Other ways to measure it
BLS’s U-6 labor underutilization metric is another way to shed light on unemployment. It adds to the unemployed those discouraged and other “marginally attached” workers as well as part-time workers wanting full-time work but cannot find it.
Nationally, the U-6 rate hit a historic high of 22.9 percent in April 2020 representing 36.3 million people. It has since dropped to 10.2 percent representing 16.5 million people. However, in the months prior to the pandemic, the rate was at historic lows—in fact, as low as 6.8 percent. Obviously, while 10.2 percent is far better than 22.9 percent, it is significantly worse than 6.8 percent, representing a difference of 5.3 million workers.
Unfortunately, monthly U-6 data is not available for the states, making any comparison difficult. The BLS currently publishes only experimental U-6 state data averaged over a year’s time.
More useful for the states is the Nonfarm Employment estimates from BLS’s Current Employment Statistics survey. Only two states—Utah & Idaho—have caught up with employment from where they were in February 2020 before the pandemic hit. In contrast, the U.S as a whole is still 5% behind. Georgia ranks 16th among the states and is 4.0 % behind. Hawaii (-14.8%), New York (-9.6%), and Nevada (-8.6%) are the three states furthest behind.
If we use standard economic ARIMA Model time-series forecasting to estimate where employment would have been absent the pandemic, no state is back on track. The United States is 6.8% behind, and Georgia ranks near the middle in 27th place at −6.1%. Utah and Idaho lead the pack being the furthest ahead, while Hawaii, Nevada, New York, California, and Massachusetts trail the pack.
Observations on state differences and policies
In viewing the differences in employment among the states, the more rural states appear to be doing better. The states more dependent on tourism appear to be doing worse. State governments that implemented less severe lockdowns appear to be doing better. To test these observations, we will be running regression analyses to tease out any correlations. We will post the results when completed.
In the meantime, it is important for government to adopt policies that will help businesses to rebound and make it easier for startups. The goal should be not to just lower unemployment but also to bring those sidelined workers back into the labor force.
Erik Randolph is the Director of Research at the Georgia Center for Opportunity.
GCO signed coalition letter urging policymakers to prioritize high-speed broadband in rural Georgia
The Georgia Center for Opportunity (GCO) has signed on to a coalition letter urging policymakers to prioritize the use of federal emergency dollars for high-speed broadband in rural, underserved areas of Georgia.The letter makes four recommendations:
Target funds to areas without access to high-speed broadband, defined as 25 Mbps download and 3 Mbps upload
- Avoid investments in government-owned networks
- Reduce red tape around deployment
- Ensure adequate resources for permitting approval
GCO’s take: “Broadband for rural areas should’ve been a priority prior to the COVID-19 pandemic. Now, it’s an emergency,” said Buzz Brockway, GCO’s vice president of public policy. “Good Internet access will be a boon to rural Georgia. Broadband is also crucial for some of our state’s most vulnerable students, and expanding Internet access is closely aligned with GCO’s mission to expand educational opportunity. In the middle of all this, we can’t afford to get mired in bureaucratic red tape, either. That’s why we must avoid working through government-owned networks and instead quickly review and approve applications to get this done.”