The labor shortage persists because it may not pay to work.
Employers are struggling to fill job openings, particularly for lower-wage positions, in part because COVID-19 pandemic policies pay potential employees not to work, a study concludes.
The labor shortage initially emerged during the pandemic-related lockdowns in 2020-21, but has lingered for various reasons, according to Casey Mulligan and E.J. Antonia, authors of a study titled “Paying Americans Not to Work,” published by the Committee To Unleash Prosperity (CTUP), an advocacy group.
“The U.S. is ‘missing’ more than three million workers of working age that could be working and were working prior to COVID but are not today,” wrote Mulligan and Antonia. “Many factors could help explain this disappearance of workers from the workforce, including continuing fears of COVID, early retirement, ‘long COVID,’ the decision by many to never return to work and instead retire early, among others. But this study shows that one factor contributing to the dearth of workers is the generous benefits paid to families without workers.”
The Bureau of Labor Statistics (BLS) reported that job openings increased 6.7 percent, to 11 million, in its latest monthly report, for December. Most of these open positions are in hospitality, food service, and retail trade, which are typically lower-wage jobs, and construction, the BLS reports.
BLS data show the seasonally adjusted labor force participation rate of around 62.2 percent remained static throughout 2022 after most COVID restrictions were lifted.
‘Work May Not Pay’
Work requirements for federal health and welfare programs were suspended for the duration of the pandemic emergency declaration, which has been extended 12 times, the February issue of Health Care News reported.
The CTUP study found that in 14 states, a family of four can receive unemployment payments, Obamacare subsidies or health coverage through Medicaid, and Supplemental Nutrition Assistance Program (Food Stamp) benefits equivalent to the wages and benefits of a job paying $80,000 a year and, in 10 other states, equal to $70,000 in employment income.
“The expansion of food stamps, health insurance subsidies, and unemployment benefits, along with the relaxation or elimination of [Medicaid] work requirements, kept millions of people from returning to the workforce in 2020 and 2021,” wrote Mulligan and Antoni. “For these families, work may literally not pay.”
Obamacare Expanded Medicaid
Obamacare subsidies are a key factor in many families’ decision to forgo employment, say the study’s authors.
“Since it was first passed into law, the ACA (Affordable Care Act) has been expanded considerably to include those with relatively high incomes,” wrote Mulligan and Antonia. “The American Rescue Plan temporarily expanded ACA subsidies and the Inflation Reduction Act extended those subsidies through 2025.”
That expansion is at the root of today’s labor shortage, says Rea S. Hederman, executive director of the Economic Research Center and vice president of policy at The Buckeye Institute.
“Obamacare’s Medicaid expansion allowed healthy, working-age adults to enroll in Medicaid,” said Hederman. “The effect was to discourage some of the enrollees from earning more, which means these enrollees will work fewer hours as a result of Medicaid expansion.”
Benefits of Work
The Trump administration invited states to submit plans to the U.S. Department of Health and Human Services (HHS) under Section 1115 of the Social Security Act that would institute work and reporting requirements for able-bodied Medicaid recipients, with the approval of the HHS, according to the Kaiser Family Foundation.
HHS granted work requirement waivers for 13 states, but only Arkansas fully implemented a plan, and it was struck down by a federal court, according to Kaiser. Other states’ initiatives, which allowed job training to satisfy the work requirement, were tied up in litigation, or put on hold by the pandemic.
Implementing the waivers would have benefited workers, says Hederman.
“Our research has found that with work requirements, the average Medicaid expansion enrollee would work over 20 hours more each week,” said Hederman. “By working more, these enrollees would get more work experience and command higher wages throughout their career as well as boosting the economy by increasing the supply of labor.”
The Biden administration reversed course and began the process of withdrawing approvals for state work requirements in February 2021.
‘Unprecedented Step’
The Biden administration’s elimination of Medicaid work requirements is part of a larger social agenda, says Nina Schaefer, director of the Heritage Foundation’s Center for Health and Welfare Policy.
“Almost immediately after taking office, the Biden administration took the unprecedented step of revoking the agreements with those states wishing to require able-bodied Medicaid enrollees to work or search for work as a condition of receiving Medicaid benefits,” said Schaefer. “This was followed by their continuing COVID emergency policies suspending the enforcement of existing work requirements in other welfare programs well beyond when the economy reopened, and people were needed back at work.”
These policies have harmed low-income workers, says Schaefer.
“Despite all the talking points about getting people back to work, this administration seems to be more interested in discouraging work than promoting it among those who need jobs the most,” said Schaefer.
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
Internet info:
Casey Mulligan and E.J. Antoni, “Paying Americans Not to Work,” Committee to Unleash Prosperity, December 2022: https://committeetounleashprosperity.com/wp-content/uploads/2022/12/Paying-Americans-Not-to-Work.pdf
