Rick Haglund: How COVID-19 was a ‘giant sledgehammer’ to the labor market

June 29, 2021 6:12 am

John Partipilo for the Tennessee Lookout

Twenty-six states, all run by Republican governors, are trying to force workers laid off in the devastating COVID-19 pandemic back to work by cutting off the $300 per week in enhanced federal jobless benefits they’ve been receiving.

Pushed by employers who contend the extra cash makes it more lucrative for workers to stay home than to work, Michigan lawmakers also voted to end the federal jobless supplements. Democratic Gov. Gretchen Whitmer is certain to veto the legislation.

But even after the federal benefits expire in September, economists, labor market experts and employees themselves say many workers are unlikely to go back to low-wage service jobs that they’ve long dreaded.

The pandemic is forcing a sweeping realignment of work and worker expectations. Some experts say a tight labor market has given workers the upper hand in setting wages for the first time in a generation.

And in Michigan, an aging population will make it more difficult for owners of retail shops, restaurants, hotels and other low-wage service businesses to find workers for years to come.

“COVID was like a giant sledgehammer that smashed a lot of employer-employee relationships,” said Michigan State University economist Charles Ballard. “We are two-thirds of the way toward putting all the pieces back together again, but the disruption was so large that it will take a long time before things are really close to normal.”

Even though the pandemic appears to be subsiding after killing nearly 20,000 Michigan residents, many workers fear returning to jobs where they likely will be exposed to unvaccinated coworkers and threatened by angry customers.

As of late June, nearly 40% of Michigan residents age 16 and older had not received a single dose of the COVID vaccines that have been available for six months.

Others are dealing with a lack of child care or are caring for family members. Last year in Michigan, about 136,000 women dropped out of workforce and therefore weren’t eligible for jobless benefits. That represented a 5.8% decline in women working or looking for work in the state.

People are only counted by the government as unemployed if they are actively looking for a job.

“The idea of stopping the $300-a-week payments will lead to some kind of sea change — that doesn’t hold,” said Larry Good, president of the Corporation for a Skilled Workforce in Ann Arbor. “That was one factor among 20.”

Missouri was one of the first states to end supplemental federal jobless benefits, cutting the $300 payments on June 12. Although it’s early, workforce development officials told the New York Times that they’ve seen almost no jump in job applications since benefits were slashed. 

Good said the pandemic has forced a lot of low-wage workers in industries such as health care, retail and hospitality to rethink their priorities. 

Some are training for new careers. About 200,000 Michigan residents are taking advantage of new state programs offering tuition-free certificates, credentials and associate degrees for pandemic-related frontline workers and others.

Others in two-income families are cutting budgets, getting by on one income while waiting for better job opportunities as the economy accelerates, Good said.

A record 4 million U.S. workers quit their jobs in April, a sign that workers believe it will soon be easier to get better jobs, economists say. And there were a record 9.3 million unfilled U.S. jobs in the same month, according to the Labor Department.

Many of those jobs will eventually get filled as the economy emerges from the worst public health crisis in a century. 

But the recovery will be painfully slow. The latest University of Michigan forecast predicts Michigan won’t return to pre-pandemic job levels until the end of 2023.

Beyond 2023, employers in many industries will continue to struggle to find workers, a result of the lack of new entrants in the workforce to replace rapidly retiring Baby Boomers.

“We are in for a long period of labor shortages,” University of Michigan economist Don Grimes told me. “It’s driven by demographics; not enough prime working-age people in Michigan.”

The number of Michigan residents aged 25 to 64 is expected to be essentially flat through at least 2028, according to the state Bureau of Labor Market Information and Strategic Initiatives.

And too many of those prime-working-age people are not working or even looking for work, a persistent problem in Michigan.

In May, just 56% of Michigan residents age 16 and older held jobs. That’s down 10 percentage points from 20 years ago. Michigan ranks 40th in the employment-to-population ratio.

And just 58.9% of Michigan adults were either employed or looking for work in May. Michigan ranks 42nd in the labor force participation rate.

Good said employers could lure many jobless people back by boosting wages and benefits, and improving working conditions.

But getting them to return to low-wage businesses, including restaurants, retail stores and nursing homes, also will require employers to restructure work, giving workers a career path and a living wage while keeping businesses economically viable.

“The only way we get to an economy that fully works is to don’t assume we will continue to have an economy built on jobs that pay low wages,” he said. “But there are no glib, easy answers.”

Ending $300 weekly federal jobless payments is, at best, slapping a Band-Aid on a labor market that needs major surgery. 

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.