Federal Reserve Of SF Proves Point: People On Unemployment Not Lazy, Refusing To Work

The Federal Reserve of San Francisco has just come out and proven that many of the business owners complaining publicly and in the media of employee refusal to work due to unemployment benefits and laziness were incorrect.

Whether or not the release of this white-paper was accelerated due to the looming removal of enhanced unemployment benefits in 10 states is unknown, as they could not be reached for comment. However, since this was a study in progress, it is this author’s opinion that the situation in those ten states was at least partly responsible.

So, what exactly does the paper say? It states, unequivocally, that the enhanced unemployment benefit of $300 per week had a small effect on people refusing jobs. Now, this does not include people who refused jobs due to low pay, since no one should be forced to accept a job that pays less than the job they lost before the pandemic.

The question was, are employees turning down jobs that pay as much as they earned before? The business owners would have had us believe that this was the case. However, according to the paper, the answer was a pretty firm ‘no.’

Only 3.5% of people who are collecting this enhanced unemployment benefit refused to take a job that was offered where they would have been making at least the equivalent of their pre-pandemic salary. This is contradistinction to what Tucker Carlson and others have been stating about the job market in recent weeks.

Removal of unemployment benefits was based on complaints of business owners who claim that they cannot find employees to fill the jobs that they have open. However, what may not be mentioned is that the jobs they are trying to fill do not offer good pay or benefits to their employees. Working conditions have also been a complaint of employees.

There was a Business Insider opinion piece featuring quotes from former restaurant and hospitality workers complaining of the low salaries and lack of benefits that were offered to them to return to work. The article is behind a pay-wall, so you may not be able to view it.

However, here is a quote from the article, “Over and over again, the people I talked to told me that while the aid provided security and support at a crucial time, they weren’t passing up work just to sit around. Rather, they were looking at other options because of the service industry’s terrible working conditions and low pay.“

From the Federal Reserve Paper: “Estimating the reservation benefit for a wide range of US workers suggests few would turn down an offer to return to work at the previous wage under the CARES Act expanded UI payments. Direct empirical analysis of labor force transitions using matched Current Population Survey (CPS) data, linked to annual earning records from the CPS income supplement to form UI replacement rates, shows moderate disincentive effects of $600 supplemental payments on job finding rates; this empirical framework also suggests small effects of the $300 weekly UI supplement available during 2021.“

Researchers at the Federal Reserve Bank of San Francisco Released A White Paper on Enhanced UI

In other words, it may have indeed been the case that the original $600 weekly supplement was a disincentive in a moderate number of cases. But the smaller $300 benefits has had a much less noticeable effect.

Further, “In particular, our estimates suggest that the $300 supplement reduces monthly job-finding rates by a maximum of about 3.5 percentage points (0.035)…The estimated impact of the $300 supplement, at 0.035, is about one-seventh of that baseline job-finding rate.

“One straightforward way to think about that number is that each month in early 2021, about seven out of 28 unemployed individuals receive job offers that they would normally accept, but one of the seven decides to decline the offer due to the availability of the extra $300 per week in UI payments. This implies a small but likely noticeable contribution of expanded UI generosity to job-finding rates and employers’ perceptions of worker availability in early 2021.”

Also from the article, “the additional UI income is found to deter job acceptance for only a few categories of workers…” So it is likely that the effect was restricted to certain industries that have been disproportionately affected by the pandemic, such as the restaurant industry, as stated in the opinion piece.

While the contribution was small, it may have been noticed by employers. But again, it should be reiterated: employable people are not refusing to go back to work. The jobs are not there to return to, and the ones that are may be lousy jobs with low pay and no benefits. Jobs that pay the same as the workers received previously have not been turned down. If employers in the affected industries improve their jobs, making them more attractive to people, then perhaps employees will return.

However, if it is conversely true that the job market has not resurged as has been claimed, then it makes sense that jobs that do not exist cannot be filled. As stated in the op-ed, an economic recovery cannot be forced, especially when so many businesses have folded due to the pandemic restrictions, even more than the pandemic itself.

Unemployment Office. Image Credit: Bytemarks by CC 2.0

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Empty storefronts are a common sight in most cities now, and this cannot be denied. The pandemic added to the already present problem of retail stores and malls closing across the country.

The businesses have to be reopened, or new businesses have to sprout up, perhaps with incentives from cities like New York City and New Jersey, in order to really have an economic recovery. Once restrictions are fully lifted everywhere, and the virus is truly gone, it is likely that the slow and arduous path to real recovery will occur.

Hannah Moller