Unemployment rate expected to drop by 0.1 percent to 4.5%
On Friday we will see the final jobs report of the year. In Washington, most of the attention will be focused on the employment numbers and unemployment rates and how they compared to expectations. But I, and many other business leaders, will be looking a little further down at the labor force participation rate report for any signs of progress on addressing the labor shortage crisis.
The last month’s report covering October was not positive. The labor force participation rate was unchanged for the month and the total size of the labor force was about 2.3 million people, smaller than the two years before the pandemic. We cannot begin to fill the 10.4 million open jobs in our economy if we do not bring millions of people back into the labor force.
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And the consequences for our economy are significant for small businesses that still cannot fully reopen due to labor shortages and supply chain constraints that threaten this all-important holiday shopping season.
To understand why people are not returning to the workforce, the US Chamber surveyed individuals who were employed full-time before the pandemic but have not yet returned to full-time work. We wanted to know what these people are doing, how they are extending their support and whether they are likely to return to work. What we found was not encouraging.
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One in five already employed say they are doing nothing to look for work and another 15 percent say they are barely looking. In some instances, this is for good reason – eight percent report they have become business owners or are now self-employed, two percent are in school, and nine percent have returned to work, but only part-time.
Of the remaining 70%, 40% say they are not eager to return to full-time work. Overall, one in three workers say they do not expect to return to full-time work before next April, with almost one in ten saying they will never return to full-time work.
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So, how are these individuals supporting themselves? Pre-planned reports using a combination of income from other members of their household (45%), stimulus payments received during the pandemic (48%), savings (47%), and unemployment benefits (36%) . Fifty-six percent report that they believe they can get by more than six months before they are required to return to full-time work, with 26 percent saying it will take more than a year to return to work. .
Many speculate that this is all related to COVID-19, but it is certainly the case that as COVID-19 has had an impact, it is becoming increasingly clear that something bigger is at work. For example, only 22 percent report that the end of the pandemic will increase their urgency to return to work, and only seven percent report that a full reopening of schools and daycare centers in their community will allow them to Your urgency will increase.
Some commentators are quick to point out that employers simply need to pay more. Of course, employers are paying more, but that doesn’t seem to be a silver bullet either. Just one in three formerly employed say a five percent increase in their previous pay will increase their urgency to return to work.
Part of the solution will remain with the business. Forty-three percent reported that more flexible workplace hours would increase their urgency for them to return to full-time work, while 39 percent said the same about being allowed to work from home.
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The government should also play a role. State and federal policymakers must be very careful about creating a disincentive to act. For example, many of the new transfer payments included in the so-called “Build Back Better” plan are not tied to work. while good,Intended, these benefits may make it easier for individuals to avoid returning to the workforce. At the state level, access to unemployment benefits—either because of the fear of COVID-19 or denial of vaccination—should be checked.
This is not the first time we have seen a sharp drop in the workforce participation rate. The Great Recession of 2008 brought a significant drop in the number of men aged 25 to 54 in the workforce. While many expected that participation would pick up when the recession ended in 2009, this did not happen. Participation only began to recover in 2016 and never fully recovered to the level of preponderance.
Failure to address the decline in workforce participation has hurt families, communities and our economy. We cannot afford to make that mistake again, so it is important that policy makers join the business community to make getting people back into the workforce a top priority.