The Pandemic Labor Force Is Flexing Its Muscles In 2021
Image: Federal Reserve Bank of Minneapolis
Timothy Noah at the New Republic explains how wages are rising faster than they have in nearly 40 years, reports Business Insider, excluding a freakish momentary spike last year when Covid-19 lockdowns began. The number of job openings (9.3 million) and the number of people quitting their jobs (4 million, or 2.7 percent) are higher than we’ve seen in 20 years. Prices, meanwhile, are up 5 percent over May 2020, the fastest rise in the Consumer Price Index in 13 years. When you exclude volatile food and energy prices, The New York Times reports, prices are rising faster than they have in almost 30 years. Is the pandemic labor force flexing its muscles?
Noah proclaims that we are not witnessing a historic moment for the American pandemic labor force nor are we even witnessing a genuine labor shortage like the one we saw at the peak of the tech boom during the late 1990s, but a momentary respite from the ghastly long-term shift of national income from labor to capital that (according to McKinsey and Co.) has been increasing especially fast since 2000. While he’s partially right in the sense that nothing that happens during a nationwide pandemic follows normal rules and rhe evidence throughout the pandemic has shown that enhanced unemployment benefits—a $600 add-on to weekly benefits, followed by six months of no add-on, followed by a $300 add-on that expires in early September—did not depress employment to any significant degree, I do think workers are using the added income to realize that they are more valuable than what they are being paid and are discovering new pursuits and talents.
How The Pandemic Labor Force Arrived
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (FFCRA), which provided additional flexibility for state unemployment insurance agencies and additional administrative funding to respond to the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27. It expands states’ ability to provide unemployment insurance for many workers impacted by the COVID-19 pandemic, including for workers who are not ordinarily eligible for unemployment benefits.
For the first time, the original CARES Act in 2020 allowed some self-employed workers to temporarily qualify for unemployment benefits. The December 2020 stimulus bill had added additional compensation for someone earning a mixed income from a traditional job and employment as a contractor, who would either receive the unemployment insurance payment or PUA, but not both.
With the Mixed Earner Unemployment Compensation (MEUC) program, a person who made substantial income from self-employment or a contracting job could receive an extra $100 a week. MEUC was also extended with the American Rescue Plan Act until Sept. 6, though some states are bowing out of that aid as well.
For example, let’s say you made $50,000 in 2019, which was split between $30,000 from a contractor job and $20,000 from a part-time job at a company. If you were laid off, the state unemployment office would calculate whether you’d receive benefits for the $30,000 via PUA or $20,000 via unemployment insurance, but not a combination of the two.
Though someone who works a traditional job and makes $50,000 a year in New York would receive $480 a week from unemployment insurance, by having a mix of the two you’d get the greater of the two different amounts, which would be the PUA of $288 a week rather than the $280 from unemployment. Mixed Earner Unemployment Compensation will now give that person an extra $100, but only if the state participates.
The March extension of unemployment benefits also applied to Pandemic Unemployment Assistance: aid for workers who aren’t normally eligible for unemployment insurance. It covers freelancers, gig workers, independent contractors and part-time workers.
Income Inequality Created The Pandemic Labor Force
The distance separating America’s highest and lowest income brackets grew by almost 9 percent annually under President Trump. That growth is faster than in previous periods. From 1990 to 2015 growth was about 7 percent – a period that included three recessions.
That 2 percent difference might sound small. But it matters once we recognize that many households cannot meet their basic needs.
By 2019, housing was unaffordable for workers in 70 percent of the country. The average family is now far less able to afford homeownership than it was just a few years ago. Almost 30 million people lacked health insurance in 2019. One-quarter of Americans have no retirement savings. And one widely cited report from the Federal Reserve found that 40 percent of the country could not afford an emergency expense of $400.
The list does not end there. A full 20 percent of American children now live in poverty, a number that increased under the Trump administration.
The State of the Pandemic Labor Force
Sergio Galeano in The Hill notes that between 25 and 40 percent of workers plan to look for a new job once the worst of the pandemic subsides. Fifty-three percent said they’d switch industries entirely if they had opportunities to retrain.
Four million people quit their jobs in April, the highest monthly tally in 20 years and double the rate at the peak of the pandemic. In May, 3.6 million people quit their jobs, the third highest reading in 20 years. If trends continue throughout the rest of the year, 2021 will see the highest number of annual resignations since this data has been collected.
Women
Rani Molla writing for Vox points out that the labor force that has shrunk by 3 million over the past two years while a record 9.2 million jobs remain unfilled. US labor statistics data showed that 3 million women have left the workforce [in 2020]. Another survey that looked at the same data was able to identify that almost 600,000 are mothers and caretakers.
Effects on the Poor
Michael N. Peterson writing for the American Institute of Economic Research highlights that in developing countries, small and midsize enterprises—as well as informal enterprises—make up roughly 70% of total employment and more than 30% of GDP (Gross Domestic Product). For most developed countries, on the other hand, informal markets account for less than 20% of total employment and only about 9-15% of GDP. What this means is that lockdown orders affect countries differently based on the economic composition of each nation.
In a working paper for the World Bank, it was estimated that approximately 1 in 5 jobs can be performed remotely in the developed world. In developing countries, this figure stands at only 1 in 26. The pandemic labor force is a distinctly American phenomenon.
Where The Pandemic Labor Force Goes From Here
Image: CNET
Oscar Gonzalez and Laura Michelle Davis at CNET give us an idea of the immediate future for labor. A total of 26 states have chosen to cancel the extra benefits, which include $300 weekly bonus checks and coverage for freelancers, this summer.
Governors in the 26 states assert that the supplemental federal money was preventing workers from filling open positions. Many economists and analysts disagree, noting that several factors are preventing people from finding suitable work — including low wages, lack of child care and fear of contracting COVID-19. Job searches haven’t picked up in the states that ended benefits last month.
Some of those states, including Arizona, Montana, New Hampshire and Oklahoma, will instead offer financial incentives for individuals to find work. Louisiana Gov. John Bel Edwards said his reason for ending the benefits is to increase the maximum state unemployment benefit to $275 a week starting in 2022.
Other states, like Colorado and Connecticut, are continuing the $300 payments but offering their own new-job bonuses. New York may also join in implementing signing bonuses for those who take and hold a job.
Unless your state is one of those that have opted out, the enhanced unemployment benefits will continue until Labor Day, Sept. 6, granting a $300 weekly federal bonus on top of what the state pays. That extra money could allow unemployment recipients to receive a total of up to $7,500 for the 25 weeks spanning from March to September.
Department of Labor
Labor Department officials say their hands are tied and can’t counter decisions by state governors to stop participation in the national unemployment programs. In February, the federal Department of Labor updated its eligibility requirements to include people who refused to return to work due to unsafe coronavirus standards. According to the Department of Labor, if you turn down a suitable job, you can be denied unemployment benefits: “You must be able, ready and willing to accept a suitable job.”
Moreover, White House officials have indicated they will not continue the enhanced jobless benefits past September in the other states, saying they were intended to be temporary. In his latest speech on June 4 on May’s jobs report, Biden underlined that “it makes sense” for those supplemental unemployment benefits “to expire in 90 days.”
Most of the states that are cutting off the enhanced benefits are also stopping PUA and terminating the Pandemic Emergency Unemployment Compensation program.
Unemployment
While unemployment rates are lower than they were at the start of the pandemic last year, as of this April some 16 million Americans (one in 10 workers) were still receiving some kind of jobless aid. According to the Bureau of Labor Statistics, more than one in four jobless Americans have been without unemployment for over a year.
States have a limit on how many weeks a person can stay on unemployment. Most provide 26 weeks, with some granting as few as 12 weeks and others as many as 30 weeks. Before the American Rescue Plan, the federal government had extended pandemic relief benefits to the unemployed an additional 24 weeks. Under the current package, federal unemployment insurance will be extended through Labor Day, offering a total of 53 weeks of additional benefits — except for states opting out.
While many states have automatically renewed unemployment insurance benefits, some recipients may have issues when they reach the benefit year-ending date. States limit benefits to one year, and that compensation is typically cut off after that date. Many states require recipients to either file a new claim or request an extension. Because it varies from state to state, those who have been unemployed for at least a year should get in contact with their state’s labor department.
Those laid off or furloughed qualify to apply for unemployment benefits in the state where they live. Once the state approves the claim, they can apply to receive whatever state benefits they’re entitled to. Because states cover 30% to 50% of a person’s wages, there isn’t a single sum one could expect on a national basis. Each state’s labor office provides information about its particular unemployment benefits.
Eligibility criteria vary from state to state, but the general rule is that one should apply if they’ve lost their job or been furloughed through no fault of their own. This would include a job lost directly or indirectly because of the pandemic.
Taxes
First, it’s important to know that the IRS treats unemployment insurance as income, which means it’s subject to taxation. In most cases, the state can withhold taxes like a typical paycheck. However, it’s estimated that millions of unemployment benefit recipients had no taxes withheld, which means they would’ve owed a substantial amount when filing tax returns.
To counter that, the March stimulus law included a tax exemption of $10,200 (or up to $20,400 for those filing jointly) for those with an adjusted gross income under $150,000 during 2020. That means the first $10,200 of unemployment insurance will not be taxable — so if someone received $20,000 in benefits in 2020, they would only be taxed on $9,800 of it. The $10,200 is the amount of income exclusion for single filers, not the amount of the refund. (The amount of the refund will vary per person.)
Some states are not providing a tax break. According to a chart by the tax preparation service H&R Block, 11 states aren’t offering the tax break: Colorado, Georgia, Hawaii, Idaho, Kentucky, Minnesota, Mississippi, New York, North Carolina, Rhode Island and South Carolina. Other states, like Indiana and Wisconsin, are only offering a partial tax break.
After some initial delays, more single filers began seeing deposits in their checking accounts starting May 28, with 2.8 million refunds going out the first week of June. As of June 9, over 1.2 million direct deposit payments had gone out in the two previous weeks, adding up to over $2.2 billion. The IRS said the next set of refunds would go out mid-June, but those are yet to be confirmed — although some Twitter users reported receiving their refunds. More complicated returns will be processed later, with refunds being issued over the summer.
