By Eliana Svilik
9/30/21
The “Help Wanted” signs are everywhere, yet it seems that so many of the people who lost or left their jobs cannot seem to find work. The effects of the COVID-19 pandemic have created an economic paradox: employers can’t find employees, yet unemployment rates are high. For those of us in high school and looking at the employment environment from the perspective of part-time employees while in school or soon-to-be full time employees once out of school, how do we try to understand this paradox and what it means for us?
Let us begin by taking a look at the numbers. According to the Bureau of Labor Statistics (“BLS”), the unemployment rate is at 5.2% as of the date of this writing, up 1.7 points from the low 3.5% unemployment rate in February 2020 just before COVID lockdowns began in the U.S. This translates to a 48% increase in the unemployment rate and about 8 million people currently classified as “unemployed.” However, it is well understood that the BLS numbers understate the true number of those in our economy who are unemployed. Why? Because the BLS numbers are based on the number of people filing for unemployment insurance or people who are “actively” looking for work, not the total number of people who are truly unemployed. More comprehensive analyses, such as the U-6 index, report that the current unemployment rate is actually about 8.8% or 14 million people.
Simultaneously, however, the number of employers searching for workers has only increased as the economy has reopened due to easing COVID restrictions. Job openings have climbed to 10.9 million, according to the BLS. Prior to the pandemic, in February 2020, the BLS reported job openings remained stable at around 6.9 million. Usually, job openings and unemployment rates have an inverse relationship; when openings go down, unemployment rates typically increase - as one would expect. However, the last several months have seen sustained high rates of both.
So what is happening? And is this problem a question of economics or social change? It appears that the answer is a little bit of both.
COVID-19 forced millions of furloughs and layoffs as the economy ground to a halt during the heart of the pandemic. Still others were forced to quit as school closures, endangered relatives, and high risk positions made holding down a job unsustainable. A common explanation for why many of these people have not returned to the workforce is that enhanced unemployment support from the government during the pandemic has deterred people from reentry into the labor market.
However, from May to July of this year, a little over half of the states in this country ceased providing enhanced unemployment benefits ahead of the September 6 expiration date for federal benefits. If government benefits were a primary driver keeping workers on the sidelines, then one would expect that as unemployment benefits expired, workers would flood back into the labor pool. Surprisingly, the data do not support this theory. According to figures from UKG, a time management and payroll company, between May and July of this year, hourly workers’ shifts grew at nearly double the rate (2.2% vs. 4.1%) in states that kept the enhanced federal unemployment benefits.
Why are workers staying on the sidelines even after government payments have ended? One theory is that many of the employees that left or lost their jobs during the pandemic have reevaluated their priorities and have realized that, in the post-COVID economy, they have leverage. Some of these priorities are workplaces that place greater value on the well-being of their workers, offer flexibility, and pay higher wages than before the pandemic.
Mental health is taking unprecedented significance in the job search, especially because of the well-documented toll that COVID-19 has taken on the global psyche. According to Forbes, 87% of employees say that it is more probable that they will remain in the employ of a company that looks after their well-being. In addition, nearly 80% of employees in a McKinsey survey believe that organized efforts to destigmatize mental health issues would be beneficial and data analyses by McKinsey found that nearly 50% of the unemployed workforce expects that a return to work will have negative consequences for their mental welfare. As the economy emerges from the lows that plagued it during the pandemic, those that are unemployed are searching for jobs at companies that are aware of the importance of mental health and are taking steps to ensure the mental well-being of their employees.
Job applicants are also seeking work that allows for flexibility - whether it be in terms of work hours or location. The shift to remote work caused by public safety concerns in response to COVID-19 has revealed that for some professions, a traditional physical workplace is not necessary. Upwork’s “Future of Workforce Pulse Report” has shown that the pandemic has caused an 87% increase in remote work, meaning that a quarter of the American workforce will be working remotely through 2021. For 60% of job applicants (as reported by a ZipRecruiter survey), the remote option is looking more attractive than ever.
Coming out of the pandemic, many job seekers are looking for higher wages - and for workers in several service-based industries, they are in a unique position to demand them. Service based establishments, such as those in the hospitality, restaurant, retail, and personal services industries, were among those that suffered the most because of COVID-19. Since the country has begun a true reopening and companies are looking to hire people back, potential employees are now in a position to negotiate for higher pay. Employers in these sectors are finding that they need more workers, and they need them now. As a result, the Wall Street Journal reports that in June 2021, the average hourly wage for retail and hospitality workers had climbed 8.6% and 7.9%, respectively, from pre pandemic averages in February 2020. Despite the increase in pay, it is important to note the current demand for workers is still at record levels and a large percent of the workforce has not returned to work, so wages and other employment benefits are likely to continue increasing.
In addition to reevaluated priorities, the post-pandemic economy is facing a skill mismatch, a theory proposed by the Wall Street Journal, among others. There is a notable disparity between offered and desired jobs. In April 2021, around a year after the pandemic initially hit the United States, the Federal Reserve Bank of Dallas conducted a survey of American workers that lost their jobs due to the pandemic. The results showed that 30.9% did not want to return to their prior jobs, a little over 10 points higher than in July 2020. The numbers were even more extreme among those that last worked in the leisure and hospitality industries, with a recent Wall Street Journal article revealing that 70% are seeking jobs in a different sector. Coming out of the pandemic, it seems that many people are looking to reenter the workforce in a different industry.
As the attempted migration out of the service sectors continues, it is increasingly becoming more difficult to secure knowledge and skill-based work. Emsi Burning Glass, a company that specializes in labor-market analytics, reports that employers are rapidly raising the skill requirements to account for the extreme competition. The pandemic also propelled digitization and automation, meaning that less jobs are available.
In a post-pandemic job market - the market that my peers will be entering - those searching for service-based jobs have more leverage as employers struggle to find workers. This market is, in many ways, to their benefit and they are more likely to be able to find work that compliments their priorities. Conversely, as my generation prepares to set foot in the world of knowledge-based work, we will be looking to gain experience as older opposition vie for similar jobs. My cohort will be in a demanding and potentially punishing position. Fortunately, if there is anything that this pandemic taught my peers, it’s the power of grit.
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