Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day
Today’s Topic: Employers Desperate for Workers
Tax it to get less of it. Subsidize it to get more of it. Economics in a nutshell. Paying workers not to work results in fewer workers interested in working. How big is the incentive not to work? What are the consequences? How is this showing up in the monthly employment numbers? Today, excerpts from this morning’s Wall Street Journal editorial. Experts — please chime in. Correct, elaborate, elucidate.
HOW BIG IS THE PROBLEM?
1. “Employers created 559,000 net new jobs in the month, which sounds great until you notice that 1.5 million fewer workers in May said they were unable to work because their employer closed or lost business due to the pandemic. Most of those workers should have found new jobs but didn’t.”
2. “The civilian labor force shrank in May by 53,000, and the number of men over age 20 who were employed fell by 8,000.”
3. “The labor participation rate declined to 61.6%, even as the jobless rate fell to 5.8% from 6.1%.”
WHAT IS THE MAGNITUDE OF THE SUBSIDY FOR NOT WORKING?
1. “Economists Casey Mulligan, E.J. Antoni and Steve Moore estimate in a new study that in 21 states households that qualify can receive a maximum wage equivalent of $25 an hour in cash without working.”
2. “In 19 states, the maximum benefit is the equivalent of $100,000 a year in salary for a family of four with two unemployed parents.”
3. “Not working is a rational economic choice.”
NB: Is the result a de facto higher minimum wage? Was this intended? Is it a good thing? “Wages are rising: 24% since March on an annual basis in leisure and hospitality. That’s good for workers, but it squeezes small businesses that are still struggling to recover from the pandemic. Some simply can’t afford to pay more.”
IS THIS A NATURAL EXPERIMENT IN HOW A UNIVERSAL BASIC INCOME WOULD WORK?
1. “The threshold wage or salary required for workers, especially the young and unskilled, to enter the workforce would rise considerably.”
2. “Add commuting and other costs as well as lost leisure, and more people will choose not to work.”
3. “This means fewer opportunities to rise up the income ladder, and more dependence on government.”
NB: “The good news is that 25 states so far have said they’ll stop accepting the $300 enhanced jobless benefit this month or next. No states run by Democrats have done so, but no less than President Biden said Friday he’s comfortable if the subsidy for not working ends on Labor Day as scheduled. It’s long past time.” Thoughts?
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