Millions of Americans have stopped working—at least on paper—over the past two years. They are only slowly trickling back into the labor force, despite plentiful job opportunities. Multiple factors are causing this, including fear of the disease COVID-19 and self-reported health issues.
Close examination of available data, however, reveals the most prominent factor is that people rely on the taxpayer dime, a recent report concluded.
“Today’s employment market is unlike any other in history,” the Dec. 8 report states (pdf). “Never before has America experienced a labor shortage of today’s magnitude, and particularly extraordinary is that the current labor shortage exists alongside still-elevated unemployment and improved compensation packages that should spur more workers into jobs.”
The report estimates that through the COVID-19 pandemic, the United States has lost close to 5 million workers, or about 3 percent of its workforce.
The report was authored by Rachel Greszler, a research fellow in economics, budget, and entitlements at the conservative Heritage Foundation think tank. The current labor shortage was primarily created by the expansion of government benefits in response to COVID, she told The Epoch Times.
“There’s both an increase in demand from all that money that’s out there and there’s a reduction in supply of willing workers because the government had been paying people to not work,” she said.
Aside from the total of $3,200 in “stimulus” checks, food stamps benefits were made more accessible and payments were boosted by 21 percent. There were nearly 41 million people on food stamps in September, up 10 percent since January 2020. The total benefits paid out, however, more than doubled in the same period, to more than $9.2 billion (pdf) from less than $4.5 billion a month.
Meanwhile, rent assistance programs allowed people to virtually stop paying rent for months on end, removing the largest chunk of living costs for many. The programs, at least in some localities, are still “widely available,” Greszler said.
Obamacare health care benefits also were expanded, removing for many people one of the incentives to getting a job: employer-provided health insurance.
“When you add it all up, there’s a lot of stuff that’s available,” Greszler said. “You can do just as well or sometimes even better by not working than if you were working.”
Some of her Heritage colleagues calculated in a recent paper that, even before COVID, the average family with two children defined by the government as poor received $20,700 in cash, food, and housing benefits, another $17,000 in medical care, and $5,000 in social services annually.
The Build Back Better Act—proposed by President Joe Biden, but recently shelved by Congress—would add another $11,300 in annual benefits, according to the paper.
COVID bills also pumped hundreds of billions of newly printed dollars into public and even private services. Although much fewer people were buying transit tickets, transit workers still got paid. Although much fewer bought plane tickets, airlines still paid their workers. Billions less were paid in taxes, but government workers kept their jobs.
These are some of the reasons why Americans saved $2.2 trillion more in the pandemic year compared to the pre-pandemic one.
Although much of the government benefits are reserved for the poor, one doesn’t actually need to be poor to get them, Greszler acknowledged. One simply needs to appear poor to the government. The system thus incentivizes people to get as much as possible of their income off the books.
There’s little known about the extent of America’s gray, off-the-books economy. Policies such as Build Back Better, however, would exacerbate it, Greszler says, not just through expanded welfare, but also by limiting independent work, such as freelancing, contracting, and gig jobs, that has actually grown in popularity in recent years.
Instead, the proposed policy would prod companies to use union workers.
It’s true that union jobs offer greater workplace protections than non-union ones and even more so compared to gig work. But promoting unions doesn’t make sense in Greszler’s eyes, at a time when there are 10 million job openings and companies compete for labor.
“I mean, employers are offering pet insurance to workers. So we don’t need the federal government intervening and saying you must provide X, Y, Z,” she said, predicting that “what the administration is pursuing is going to backfire.”
She gave the example of Puerto Rico.
“They have, on the books, incredibly strong labor market protections. They would be considered very pro-worker. Well, what happens is you drive up the costs of employing people so much the employers don’t want to employ people, and then you have a huge underground or gray economy,” she said.
Officially, Puerto Rico has a labor force participation rate of only around 40 percent. The U.S. average is around 60 percent.
Off-the-books work provides even less protection than gig jobs, Greszler pointed out.
“A ton of people are going to have zero workplace protections, they’re not going to have the wages they otherwise could, they’re not going to have control over their schedules how they might, and the government’s also not going to have any revenue coming in from their work because it’s not on the books,” she said.
Once too much of the economy turns gray, it could create a vicious cycle, she said. The government may try to squeeze more taxes from the visible part of the economy, further jacking up the allure of going underground.
Greszler acknowledged that there are other factors keeping Americans from getting jobs.
Recent surveys show that 30 percent of people who are unemployed say that it’s because of their physical health and 15 percent say it’s because of their mental health, she noted. Also, about 1.2 million people aren’t looking for work because of some reason that has to do with COVID, according to the monthly survey by the Bureau of Labor Statistics. Taking those numbers into account, however, government handouts still remain the most significant factor.
“If there weren’t money available out there, workers would have to go back,” she said.