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When the U.S. Department of Labour posted their job gains data for the month of April, it sent a shock wave throughout the financial industry. As the pandemic recedes and the US economy reopens, economists at Bloomberg were widely expecting a hiring spree of around 1,000,000 jobs. Instead, they got about a quarter of that, or 266,000 full-time jobs added to the payroll.
Normally, this wouldn’t be that interesting of a story. Financial eggheads get their math wrong, whoop-de-freakin-doo. But the real interesting bit is in the underlying details. Why did hiring miss targets so badly?
Because this time, it wasn’t because economists underestimated the pandemic, or the pace of vaccinations, or even employers expanding their workforce. Instead, this jobs miss was caused by employers trying to hire people and being unable to.
So now the recession has shifted into a new, strange phase. No longer are people clamouring for work that’s not there. Instead, there is now a simultaneous high unemployment rate, yet a hiring gap of unfilled positions. So what the heck is happening here? Are people simply refusing to work?
Are Unemployment Benefits to Blame?
A prevailing theory has been circulating on the mainstream media is that Americans are refusing to work because the government is simply paying people too much money.
The theory goes that the federal government’s multi-trillion dollar expansion of the unemployment system has created a Socialist welfare state that disincentivizes people from working. After all, why work hard when the government is willing to pay you to sit on your ass and do nothing?
The idea is not completely out of left field, and is why it’s so tricky to design income support programs. Pay too little and you leave too many people in poverty, but pay too much and you get Denmark, where people sit around and just “be happy.”
Here’s the problem with that argument. The expanded federal unemployment program that created an enhanced $600 weekly benefit was started by…President Trump. Enacted in March 2020, the Coronavirus Aid, Relief, and Economic Security Act was passed unanimously by both parties and signed into law by Trump. The more recent stimulus bill, the American Rescue Plan Act, was passed in March 2021 and extends the existing unemployment benefit at a much more modest $300 a week.
So now, a $600 weekly benefit that both parties were, again, totally fine with back when Trump was president is now being accused of being a socialist/communist government takeover now that Biden is president, and somehow the Worst Thing Ever. Classic.
The second problem with depicting federal unemployment benefits as a socialist free money giveaway is that it’s not actually free money. A Universal Basic Income (UBI) program which gives money to everyone universally would be free money, and if ever implemented, would need to be designed very carefully to make sure it doesn’t incentivize people to not work.
The enhanced federal unemployment benefits, on the other hand, layers on top of the existing unemployment benefits program. That means that the normal rules of each state’s unemployment program still applies. You had to have been employed before the pandemic, your job had to be eliminated for pandemic-related reasons, and if you’re offered your job back you have to take it or you lose out on further unemployment payments.
Remember, unemployment benefits are funded by an employees’ previous payroll contributions, so these benefits are less “lazy people being subsidized by hard working taxpayers” and more “people getting their own contributions back.” The program is structured similarly to Social Security, and nobody ever yells at Boomers for taking government benefits when they cash in their SSA checks.
And you can argue that the unemployment system is vulnerable to fraud, but that’s true of literally any other government program, including Social Security. If the actual problem is that people are defrauding the system, then the solution is to step up enforcement to catch people who are acting in bad faith, or to close the loopholes that allow people to exploit the system in the first place.
That’s not what Republicans are proposing, however. Instead, 17 Republican governors have announced that they will unilaterally block federal funds from their constituents starting today, March 17. That’s an…interesting way to govern.
So while unemployment benefits are an easy bogeyman to blame for this inability to hire, it seems that politicians are going after the easy target rather than the actual problem.
Another more interesting explanation for the hiring gap is something called the “Shecession.” Basically, the shecession is the phenomenon that unlike previous recessions, the pandemic has impacted women in the workforce way harder than men.
It’s hard to pinpoint the cause on exactly one thing to blame, because it’s a strange combination of factors that made this happen. First, the sectors most badly hit just happened to be ones mostly dominated by women, like retail, tourism, and food services. Secondly, the jobs in those sectors that tended to be more customer facing and therefore the first to be let go tended to be staffed by women, like waitresses, flight attendants, and customer service. In retail alone, almost 95% of the job losses since February 2020 were suffered by women.
And finally, schools have been shut down and moved to virtual learning, and because childcare responsibilities fall primarily on women, the damned kids are keeping women stuck at home and not able to go look for work. According to a survey from the Kaiser Family Foundation, 30% of women were forced to quit and drop out of the workforce because their child’s school or daycare closed down, with many primary schools in the US having no plans to reopen for the rest of the academic year.
Add this all up and we have a shecession. Women were first to lose their jobs, then got stuck at home caring for their kids, and will be last to get their jobs back, likely at a lower wage than everyone else. So while we’ve all suffered during this pandemic, spare a thought for the women in our lives. They have suffered far more.
What About Real Estate?
And finally, there’s our old friend real estate.
This hasn’t reared its ugly head yet, but I’m betting it will as the economic recovery drags on. Last recession, an unexpected factor in prolonging the economic recovery in 2008/2009 was the inability of people to relocate to where the jobs were. This was of course caused by the housing crash that cratered American home prices. By making so many people underwater on their mortgages, people ended up trapped inside their houses, unable to move or sell because they owed more on their mortgages than their property was worth. So even though jobs were available halfway across the country, people weren’t able to take advantage of them because they were slaves to their home.
We are primed for a similar situation now. Much shock and confusion was played out across the media about how in the middle of a recession, home prices were continuing to rise. But it wasn’t downtown cores where all the buying frenzy was happening, it was in sleepy small towns like Columbus, Ohio and Hamilton, Ontario where city dwellers fled their virus-infested condos to swarm detached homes with weird features like “yards” and “driveways.”
The resulting bidding wars drove home prices in these small towns to insane levels. These buyers went into crazy amounts of debt buying real estate at big city prices, but in places with nowhere close to the job market necessary to support them.
As the recovery happens, these people will find themselves underwater and trapped in these overpriced albatrosses just as the unfortunate victims of the 2008/2009 recession did.
Only this time, it will be 100% their fault. While subprime lending was blamed for the 2008/2009 crisis, many of the people whose home prices got hammered actually didn’t do anything wrong themselves. They were sideswiped by history like the rest of us through no fault of their own.
This time, the people who go underwater on their mortgages will be because they way overpaid for houses that were never worth that much to begin with. These are the people who got swept up with the FOMO, got into bidding wars, and let their emotions get the better of them. When interest rates plummet, you’re supposed to use the opportunity to pay off debt, not get into more of it! Unfortunately, they will realize their mistake way too late to do anything about it.
So there you have it. These are three factors that are holding back the job market at this state in the economic recovery. The first I believe is overblown for political reasons, the second is a problem but will eventually go away once schools reopen, and the last I believe will become a longer-lasting factor that will plague the economy for months or years after vaccinations have peaked.
What do you think? Is our economic recovery going to be fine, or do you think it’s going to be in trouble and why? Let’s hear it in the comments below!
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59 thoughts on “Are Unemployed People Refusing to Work?”
From what I read the second reason the “she-cession” is also a myth and way overblown.
You have part of the equation correct, however your philosophy also is there.
The initial $600 expanded Unemployment Bennifits where a “temporary” means to backstop people who had been forced out of work due to Corona lockdowns. The continued and expanded unemployment benefits as the economy and businesses reopened retarded the jobs.
There are actually a surplus of vacant jobs with a restarted return to work ratio. This is for a few reasons. One, high level unemployment in some states is higher than the pay for open jobs. Two, many people have found side hustle jobs that are cash service gigs and are working the system a little.
When the people working the system feel they are getting left behind and can get more cash by getting back in the job market they will return. If they don’t feel the pain of being left behind, they won’t return to work. They are comfortable, and returning to hard work isn’t as appealing.
When the renters protection from missing rent/mortgage payments disappears and the unemployment benefits recede to normal there will be a major financial reset.
People will be evicted, rent will be due and civil processes for landlords getting their rent back will become the norm.
There will be anger, resentment and once again everyone will blame the banks. Normally I would agree with that as I despise the financial system. But this time, the Feds are 100% to blame.
The current administration is magnifying the problem simply because they don’t want to deal with it. There are midterm elections in a year and they don’t want to get destroyed being seen as the reason for the people’s suffering.
But hey, I’m just a cynical person.
The current federal minimum wage is not a living wage. The increased unemployment wages is close to a living wage. Most states’ non COVID increased unemployment benefits are UNDER the the federal minimum wage and the benefits are taxed. Pay a wage that is more than unemployment. Amazon, Walmart, McDonalds, etc., surely can. And if small businesses can’t, maybe the government doesn’t see them as the backbone of America like the friendly legislator assures us.
The Federal minimum wage was never meant to be a “living wage”. Minimum wages are limits at the absolute lowest levels, which would be poverty levels. States are responsible for setting their minimum wages separate to that of the federal level due to the cost of living in every state being different.
Also, states rights trump the ability of the Fed to force things upon them.
If you want a “living wage”, get a “living education” and a “living job” (not one meant for a teen/first time job).
It isn’t totally overblown. I have a friend who has a food cart and another who has a restaurant. Both of them can’t find reliable workers. Unemployment is part of the problem. You can get these low-wage jobs at any time. Why go to work when you don’t have to. School is part of the problem too. I think it’ll improve in the fall when school reopens full-time.
My neighbor told me he was going to milk unemployment as long as he can. Unfortunately if ppl can live off a wage they will do it as long as they can whether they need to or not. The fact that people pay into unemployment in my mind is separate from wether someone actually needs it or not
Your instance to view everything through a predictable political bias is exhausting. It causes you to view everything from “this side good, that side bad” viewpoint rather than as things actually are, which is usually complicated and never cleanly aligned with one side.
The further a person is to the left or right politically, the more simplistic and absolute their views tend to be, when the world is always more complex
Couldn’t agree more and often the problem with Wanderer posts.
Yes I find myself reading this blog less and less because of this. I wish MMM would write more.
To Nick, very true. But polarization does sell a lot of newspapers and win a lot of elections. Ever notice how it also prevents citizens from deeper discourse. Hmmmmm?
Why would anyone want to work a minimum or near minimum wage job, with no benefits, lousy hours that shift around so you can’t get schooling (even if you could afford it), and on top of that deal with abusive customers and managers — if they didn’t absolutely HAVE to. Oh, and you can’t get a full work-week at that job because then your employer would have to treat you better, so you have to juggle two shitty jobs instead.
I’ve seen quite a few employers in the service industry say they have plenty of applicants who WANT to work for them — but then again, they are paying well over the minimum wage AND provide good benefits.
People want GOOD jobs where they will be well treated.
I don’t blame anyone for avoiding the piss-poor positions paying poverty paychecks. (And say that fast if you can!)
Good for them. It’s good for society when the downtrodden can stick it to the man on occasion.
Let’s reform the labor system and give workers decent minimum wages and a decent level of protections from abusive managers. That will cause lots of people to want to work.
EXACTLY. So tired of hearing people say those on unemployment are lazy and entitled. No, they’re obviously smarter than you’re giving them credit for, because you want them to work a dead end job that requires too much and gives nothing back, but they want something better. These were all “heroes” and “essential workers” a few months ago, now suddenly they’re ungrateful and spoiled? Bullsh*t.
I’m an atheist but amen to that 😊
Why knock Denmark where the nominal GDP per capita is similar to the USA and significantly higher than Canada’s? It seems to work for them!
Exactly! It’s very dismissive of an entire country. They have a high standard of living and they’re somehow bad for ‘being happy.’
I believe you are witness to something called “sarcasm”.
Maybe the jobs are shit jobs and underpaid? Seems pretty rationale to me that folks don’t want to work jobs where they aren’t even making a living wage. Maybe employers should try paying more?
With the real estate argument, how does the work at home trend factor into the argument laid out here? The area itself might not have the job growth normally needed to support home valuations, but maybe home valuations are undergoing a shift if one can work from anywhere, and that’s the dynamic that might underlie and support home prices, not local job growth?
Basic economic theory provides that if we pay people not to work, this, at aggregate, will reduce the willingness for people to work. I am not calling these people lazy or stupid they are just rational economic actors in their own unique life situation.
This was true when Trump was president and it is true now. It is [very] basic economics. Of course it will be politicized by both sides, but that doesn’t change the facts.
I disagree that these all being “crappy” jobs that aren’t good enough for people is the problem. Many employers are paying $15-$17 an hour, Walmart, Amazon, FL DOT, etc. , with benefits and still can’t find enough willing workers.
There were 8M available jobs at the end of the month and only 300K were filled. Brute logic tells us there is an overarching issue. The policy that was put in place last year isn’t in dispute, but rather what should be done now to maximize these employment opportunities for our citizens.
P.S. Wanderer, I want you to call me when you are 37 and discuss how your political view may change between now and then. Mine evolved quite a lot!
15 or 17 dollars an hour is not living wage. Rents are well over 1k to 1.2k (1/3 – 1/2 of pay).
How much is a living wage and should it be federally mandated?
My views changed as I aged, too. I learned that the conservative viewpoint I had was woefully ignorant of many facts, so I went out and learned better. Now I’m liberal. 🙂
Great response to a really condescending comment. (And I am with you.)
I didn’t mean to be condescending and I’m sorry if I came off that way. If you were to go down a list of social and economic issues you’d find as many “liberal” marks as “conservative” in my belief system, which is constantly evolving, along with several “I don’t Knows”. I didn’t use any of those labels I simply said I’d like to hear about his evolution over time.
I am against the polarizing conservative/liberal or us/them mentality that the media uses to sell newspapers and politicians use to get elected. It’s very negative. I think ideas should be evaluated on their individual merits not what one group or other has attached to their platform.
I’ve done deep study in economics and a lot of the talking points in the article and comments simply don’t stand up to evidential scrutiny. It’s not a party thing either. Both US political parties make economic policies that are harmful at aggregate because of the short sighted incentives provided by “the next election cycle”
I’m much more interested in having a discussion around facts and what is best for our citizens than playing an us/them game.
People are definitely turning down work all over the place where I live.
I have never seen even entry level and/or fast food jobs near as low as the minimum wage where I live; most hourly rates are ~10-16/hour. Jobs a couple of dollars an hour over the effective hourly wage on enhanced unemployment are being turned down at my workplace and people who schedule interviews have flat out told our HR they’re not intending to actually go back to work until the benefits expire. It is incredibly easy to game the system.
It may not be the main reason for the employment gap but it is definitely a factor.
People that were working like crazy for years must be feeling good about staying at home and spending time with family, without having to worry about going to work, especially when there’s an alternative source of income (unemployment benefits in this case). Sounds like people are enjoying a FIRE preview. Jokes aside, people will not feel comfortable going to a workplace until a majority of the population is fully vaccinated, and restrictions are eased all around. I think the CDC’s ‘hurried’ announcement related to removal of no-mask restrictions indoors and outdoors for fully-vaccinated people was also intended to encourage the unemployed to seek jobs. Regardless, it may take until fall before people start to seek jobs.
I think you meant “today May 17” instead of “March 17”.
Great post, I’ve been wondering about the effects this will have on real estate, as the pandemic seems to created a new crop of “homeboners” (love that term you coined).
Just FYI, I think you meant “May 17” instead of “March 17” in the paragraph :
“That’s not what Republicans are proposing, however. Instead, 17 Republican governors have announced that they will unilaterally block federal funds from their constituents starting today, March 17. That’s an…interesting way to govern.”
I like how you think around $31K/year is enough for you to live without needing to work (looking at your 2019 budget numbers), but $31K in income would not be enough for the unemployed to consider not working. Based on this CNBC article (https://www.cnbc.com/2020/07/23/average-unemployment-insurance-payment-in-each-us-state.html) of the average unemployment check by state, the average check across all of the states is roughly $307.88/week (or $16,010/year). Then add the $300/week ($15,600/year) bump from the recent Rescue Plan and on an annual basis you are talking about $31,610/year. Your 2020 budget showed you living at $25k/year. Why is it hard to believe that someone else receiving enough per week to live your lifestyle would not choose to do so?
Interesting article and appreciate you providing alternate theories as to why the job numbers missed expectations. Based on what I’m witnessing in my town we are unable to fill jobs and I know dozens to family members, neighbors, and friends that are simply choosing to take unemployment until they can’t. I can’t blame them, since they make about the same pay in both scenarios but only have to work in one. It makes financial sense. I think the article dismisses this scenario simply to disagree with a political party. Sometimes the obvious answer is the right one.
CopeJ made a very interesting point. While Wanderer and FireCracker have figured out how to live off of 25, 00- 31,500 per year, they have only been able to do so after having obtained advanced degrees, after having worked and saved over 60% of their Salaries for many years, after having planned out every nickel & dime of income, savings and investments and made a plan for all contingencies for many years before they made the leap to FIRE…So, its a disingenuous argument to say that an unemployed, regular Joe , American can just as easily get by on 31,000 per year of unemployment benefits. Yes, FireCracker and Wanderer do it, but look at all the time, effort and education that went into the planning of it. Additionally, they ( obviously) don’t have a mortgage payment.
In some areas of the country, the unemployment benefits are simply not enough to live off of ( Florida , and Texas have had some of the lowest paying benefits while generally also having a high cost of living)
I also wonder if employers will start offering better wages and benefits,. Although the effort to increase the minimum wage failed and some notable union efforts by Amazon employees also failed recently, there seems to be a pervasive undercurrent of laborers demanding better wages and safer working conditions. I hope that employers take this ” nudge” and make these improvements for our workforce.
I loved the movie, and I had recently read the book so I was very excited to see the movie. ( Totally recommend the book to all our FIRE friends) The book was a bit depressing , too ( as many people here have commented, because it makes you sad to know that so many 65-80 year olds are being used -and abused- as a seasonal work force by these corporations that could care less if they fell and broke a hip at work). But ultimately, it was a very hopeful book that emphasizes the resiliency of the human spirit.
The jobs that are open now are typically the lower paying jobs (less than $20/hour). Someone who is used to living on $15/hour could live on $31K/year much more easily than someone used to making six figures. These lower paid people aren’t (typically) going to have a high mortgage and car payment because they couldn’t qualify before. Therefore, they can live on less now because their life is already structured around a lower income.
I think our economic situation will rebound just fine with no problems at all whatsoever. I don’t really think the 266k number is really anything to be concerned about.
So many people are trying to make it a big deal out of one number. An economy takes centuries to develop, a single number that popped out in a day is not going to make or break the entire economy.
One of my best friends has a son who works at Target. Shortly after the recession hit and federal unemployment was expanded, his son’s coworkers stopped working and made more in unemployment than they had received while working, and my friend’s son wanted to do the same.
My friend ultimately prevailed in convincing his son to continue working, and I think he was even promoted later. But’s definitely true, some folks did earn more being unemployed than employed.
There is another argument on the crazy home prices which I’m not sure what to think of, however it does seem to have a fair amount of sense behind it especially for American homes. And that is with USA having printed something like 30% of their fiat currency in just the last two years and essentially giving it away to so many people who didn’t even lose their jobs or truly need it, it’s expected for them to have some pretty high inflation coming. The best way to hedge against an expected large rise in inflation is to purchase assets using debt and when mortgage debt is so cheap with ridiculous 30 year long fixed pay periods… Yeah… It actually does make sense if there will indeed be a lot of inflation of the USD.
Canada, however, I can mostly agree with you. We may have printed a relatively large amount of money for the pandemic, but at least it was given out to people without jobs that would have been earning more anyways or given to struggling businesses needing to stay afloat. So it’s highly likely that we won’t have as much true inflation. What I fear though is that with these higher prices in commodities and certain items due mostly to supply issues, they’ll just keep the prices higher than before as Canadians “get used to it” which may in turn just cause inflation on its own through the CPI. Home wise though, we don’t have 30 year fixed mortgages and with potential inflation on the way they’ll need to raise the rates to combat it somehow and therefore we should see some kind of correction. Most of our stupid home prices are also because of the unregulated real estate market here which is becoming more of a talking point and I can see some politicians hoping on board to gain votes. And even if nothing changes at all, eventually we millennials and new gens will likely rise up and vote for something other than the liberal/Conservative back and forth we’ve had forever. It’s coming and we have the power of the internet to come together to shake the tree, much like GME.
40%+ of the workforce are women. Many (probably most) of them have children at home or are caretakers for elders. Childcare is not yet open. What part of this equation is a mystery?
I’m betting the ladies with children at home will return to work when childcare becomes available and/or school starts.
And employers will need to raise wages. If you can’t wrap your business around at least $15/hour as your minimum wage, you may find yourself without reliable help — ever. It is a crime that so many are paid so poorly that they must be supported by the taxpayers with all kinds of programs. Walmart is the largest employer with so many qualifying for government support while working full-time.
I think each of these points are at least somewhat valid but others are missing. Sure, there’s a few gaming the unemployment system knowing their old bosses can’t be bothered to submit paperwork to the government that they turned down coming back and the agency is too swamped to catch them. But I think there are bigger factors keeping people out, especially since even Burger King is paying more than the available unemployment here plus offering a $500 signing bonus. One is the March/April stimulus money (really adds up for larger families especially when combined with no childcare costs, which has gotten much more expensive this year if you can find it) and coming new child payments in July. Another is burnout from the past year where workers need more mental health recovery before facing angry customers again. And a third is teenagers not joining the workforce as they had decades ago, perhaps taking the opportunity to make up for the experiences they didn’t get last year.
How fast would the housing prices drop- adjust back to normal? Drop 10%? I don’t see people going back to the office yet. Would this be in 5 year intervals due to the mortgages rate up for renewal? I know we lack housing supply (ie – we can’t all live in a large house)
I live in the US and have received unemployment EDD from April 2020 to April 2021. I could have gone back to work much sooner, but I took the “free” money. Several of my friends did the same. I know we are not the only ones. Your partisan political views and disdain for Trump taint your blog posts.
It isn’t the employee that pays for unemployment. It is the employer. Which is completely opposite as SSI.
It is not the employee that funds unemployment. It is the employer. Which is opposite of SSI.
I’ll add my two cents to the mix… A lot of these new owners of backyards and driveways won’t have work in the city they live in, but they will continue to work remotely. They will continue to enjoy their backyards and driveways, with no intention to sell… My crystal ball doesn’t forsee a crash in the real estate market at all.
Also, I agree with the comments regarding people staying at home because restrictions are still all around. Governments are telling us that it’s safe enough to work and see a bunch of strangers inside and outside, but when your shift is done go straight to home, don’t talk to your friends, don’t even think to see them during week-ends, and don’t leave your home after 9:30pm. But sure, you can go to sleep, wake up and go to work again…
Why should people want to work if they can’t enjoy spending the money and if their survival (and more) is taken care of either way ?
Superb post. You nailed it.
For non-US people, I also think this is a nice example of why federal level actions don’t always (often?? Lol) work. States and regions are Too Different. I don’t expect this to be apparent you less you have lived in both types and seen it – it is not just the I-95 corridor in the east and CA/Portland/Seattle in the west.
Example 1: Ou monthly basic budget is $1300 a month. We live well and have horses, 2 vehicles. ONE income. (I am NEVER going back – heh heh 😈). In other areas/states we lived in, $1300 a month would barely cover utilities in winter, let alone a mortgage…you just can’t do broad brush strokes no it’s going to be effective.
Some areas, unemployment is diddly squat. We all know it’s nothing to aspire to. The renowned stimulus checks won’t cover basic expenses. In contrast, our VLCOL area, the $600 additional payment made unemployment MORE than your normal wage ( yep, wages are that low and you can live just fine…The federal push for the higher minimum wage here would be a ludicrous amount of money for the type of job.)
Example 3: Importantly, the “stims”, as the Stimulus checks are referred to here are a) more than people earn IN A MONTH, if not two. So, what happened? Not to mention the child tax credit thing. People – MANY – haven’t showed up at work or attendance is way down. Drug use spiked. New LEDs on all the pickup trucks in the lot, trade ins and four wheelers…guess what? These folks will be worse off, because it *seems* like an endless amount of money to them. But they’ll be left with payments that put them behind, because they upgraded everything but their pay will revert.
Also, did you know, some areas do not have a requirement to look for work ?!? What?!? (my state just enacted this – mind boggling that you could just sit and not do job searches or interviews if offered one). Families live together and help each other, pool their stims and “the draw” (as unemployment or disability are called) and manage to live. Sure, they don’t have an EV, they don’t shop at the stores you do, and their truck may be from 1987 , with chickens running around their manufactured home, but sometimes I think they are happier than the office people staring at a screen all day.
Which is why I like FIRE, and read this blog.
So YES, I agree that the payments and freebies are a disincentive to work. YES I agree that the system is broken.
I ALSO think that businesses will just have to go with the capitalist method of “ pay more” if they really want an employee. Already raised pay and still not getting anybody, guess they’ll have to look towards their perks, is the workplace actually pleasant and safe, and raise pay more plus add retirement plans (nobody here even knows what a 401K is – plans not offered). And yes, everyone is hiring…
Sad, because I think all that Stim money went to Amazon, WalMart and the car dealerships. Well, I have index funds, so we’ll be fine, but the rest just lost their money.
Cristine, you are preaching the gospel. LOL at “trucks with LED lights”. Yep, seeing that here and hearing the same from the ATV dealers.
I agree the COVID restrictions and health concerns are playing a role, along with the govt benefits. Especially agree the economics vary so much by state. Especially the real estate portion. My state FL is getting a massive influx of people! Supply and demand!
With 8M jobs available and 300K filled, the title of the article should be changed from “Are unemployed people refusing to work?” To “Why” are they refusing to work.
That is too funny, we aren’t the only place with the early a.m. parking lot lit up like an airport. Lowe’s, Amazon, and the other big box stores are making out like bandits. Men at my DH’s work were calling wives (or SOs) at home constantly to see if the money went through yet.
The poor manager at Pizza Hut (right after the most recent stim check) was absolutely mobbed all week. She yelled – “we’re hiring people – As of Right. Now. We’re hiring.” If I knew my way around the area, I’d be a driver – though of course, nobody tips here – lol.
OMG, life is hilarious sometimes.
Real estate effects are definitely a thing. Whether moving from a city within blocks of a riot and shootings to escape to the cheaper, quieter country one county over (I.e. the people who bought our house last fall) or buying in a large city, where somebody finally has a crack at home ownership for whatever reason (low interest rates, market investments are up, etc).
I am very interested to see how this all shakes out in the next few years. WFH is a factor. Hopefully, a second factor is realizing the there is more to life than the daily grind and stoopid commute. I know many people who decided last year that quality of life was more important- whether changing jobs, dropping to only one person working full time – and deciding not to go back, reordering life in some key ways.
Also, if I remember the stats correctly, wages were stagnant for a Long Time, and only recently (a few years, maybe) did they begin to improve. So, maybe it is time for the pendulum to swing and wages to increase- at least for businesses that want to stay competitive. Then, they can raise prices to compensate…oh wait, is that inflation? The good kind, I suppose.
Well, let’s see.
Go to work for a shitty boss at a dead end shitty job and deal with shitty customer attitudes for poverty pay, OR
Stay at home for poverty unemployment.
Frankly, I would be disappointed in my fellow Americans if they chose the first option. It would be moronic to do so. I don’t blame them.
People who work for a living should be paid a decent living and not poverty wages. The fact that we have a large class of people called “the working poor” is a damning indictment of our current system. Employers need to be forced to pay a decent wage.
People who work for a living should be treated with dignity by their management and by customers — and management should tell the customers to get the hell out of the store if the customers don’t do that.
Expecting them to put up with the typical piss-poor poverty-wage job when they have any other option is sheer foolishness. Good for them.
Let’s up the minimum wage and get rid of the other loopholes in the system that allow employers to mistreat workers. If I have to make a bit less in dividends so my fellow citizens don’t have to work and live in poverty, I’m good with that.
Would you agree to a wealth tax, a percentage of your portfolio, to reduce poverty? What percentage would you agree to?
My FIRE date is coming up next year and, because I have paid such high taxes over the years, helping many downtrodden Americans, I was pleasantly surprised to see that post FIRE I will pay little to no taxes on my portfolio drawings.
Did you know that the majority of the households in the bottom 20% of income levels have no one working? Also, income inequality in the USA is explained to a great extent, although not totally, by improperly measuring income brackets at a point in time rather than statistics about the same groups of people throughout their lives? The majority of people in the top 20% of incomes started their lives at the bottom 20%. Factor in age and you get a very different answer.
I agree with you about customers and bosses treating workers with respect. I started my career at 23 working in a grocery store for 4 years to get through University and it was tough sometimes. I started at $6.25 an hour in 2003 yes it was very hard to get by. In time with hard work I was paid more, however.
I worked on a so called “food stamp store” (not my term) and my hard work was often ridiculed by other workers, who asked “don’t you know this is a ghetto store”. The meat manager told me I was wasting my time going to college, saying I would just end up working at McDonalds like so many college graduates. I persisted, though, and it paid off. It isn’t popular to say, but culture, personal responsibility, and hard work contribute so much to socioeconomic outcomes.
PS I agree with helping those less fortunate, even with taxes. I just think policies need to be designed to help them help themselves, like vocational training for example.
Many complain about people being on the government dole, but what kind of life is it really? Jobs and productivity will lead to much better standards of living.
I’m not advocating people stay on the dole, I’m advocating that EVERY worker gets paid a decent, non-poverty wage. EVERY single one. If the job needs doing, then the person doing that job for a living should be paid a living, not poverty wages. Period.
It really is that simple.
Why should people have to work AND live in poverty just so business owners can make lots of money? It’s just plain wrong.
The fact that you got out of poverty is wonderful. I’ve been poor too. Working hard for shitty wages is awful. There aren’t enough good jobs for everyone to follow the path you and I did and get a better paying job. If employers had to pay decent wages then that would not be true.
As for a wealth tax, that’s a totally different discussion and I won’t switch discussions from: “All people who work for a living should earn a non-poverty living.”
Good points made. Did you know less than 3% of Americans that 1) graduate high school, 2) get a FT job, and 3) wait until they are married to have children live below the poverty line? Again, a majority of households in the bottom 20% of incomes have NO ONE WORKING. If no one is working, with legitimate exceptions like disabilities excepted, why would the expectation for them to earn more exist?
Further, many of the benefits conveyed to households in this group take the form of benefits in kind, such as housing and food subsidies, which aren’t counted as “income”. You are entitled to your beliefs but I’m telling you we can help people achieve much higher standards of living by helping them improve their productivity, which correlates to a higher standard of living.
Also, more to the point of the article, many of the jobs available right now aren’t being filled despite being significantly above the Federal minimum wage. When the government extends unemployment benefits despite jobs being available, they inadvertently delay the recovery.
The problem with policy engineering of wages is that, on the surface, it appears to have an immediate and direct benefit to people making low wages. However, in the medium to longer terms, it has the undesired effect of more inflation, which makes the new, higher wages worth much less all over again. There are a host of other economic issues with minimum wages that are widely researched by economists.
Free market economies have the best track record of lifting the largest number of people out of poverty than any other across the world, and the freer the economy, the higher the standard of living. It isn’t as much about what system would be “nice to have” and what that system would “nicely achieve” in theory, as we can all agree helping the less fortunate is a laudable goal, but instead it’s about what system has the actual intended benefit, in practice, of improving real people’s quality of lives when people are behaving as they really do.
Let’s not attempt to change the point yet again.
I’m talking about one simple concept:
People who work for a living should be a paid a decent living, not poverty wages. Period.
How many poor people there are that don’t work is irrelevant to this.
There should be NO working poor.
If a business can’t afford to pay the employees that work there for a living an actual living instead of poverty wages, then it should go out of business and society should redirect its resources to a business that can do so.
As for higher wages causing inflation, index the minimum wage to the inflation rate. That way, the folks at the bottom won’t be harmed by inflation.
Plus, it makes home ownership more affordable because the purchasing power for those at the bottom of the working chain would stay largely constant and the long term mortgage cost of the house would effectively drop due to inflation.
One thing I have noticed is that conservatives get all anti-spendy as soon as that spending actually helps the lower classes. As long as it helps the upper middle class or higher (and not the hoi polloi) spending is wonderful, right and proper.
I am not attempting to change the point. The point is less poverty, we just disagree on the best way to get there. It’s ok to agree to disagree!
You seem to advocate socioeconomic engineering by the government legislating higher minimum wages. You believe that businesses that can’t support these undefined higher wages should go out of business. But you aren’t considering the knock on effects of your proposed path.
Firstly, “working poor” may need that lower paying job temporarily, as I did, to get to a higher economic position. Under your plan, these jobs wouldn’t exist at all. If wages are arbitrarily raised to a higher level to meet a certain standard of living for a given price level, this will either increase prices and reduce the value of those wages, or it will result in fewer jobs altogether. For many in society a low paying job, as a start, is better than no job. None of what I am saying is controversial from a economic POV.
Production is what creates resources in the first place, whether they are ultimately allocated to others by the government or enjoyed by those that produce. Saying that we “want no working poor” is agreeably a worthwhile goal, but I don’t think you can just stroke a legislative pen to get there. This approach often leads to lower standards of living by reducing employment opportunities. History and economics bear this out repeatedly.
In my view we should help the impoverished with vocational training, job programs, child care, and even life coaching to improve their station in life. Increasing their human capital in this way will lead to a much higher standard of living than a minimum wage.
P.S. Our FL minimum wage is indexed to the CPI. However, you wouldn’t agree on the base wage in the first place, so indexing isn’t really a solution. If you raise that base arbitrarily to a higher level and then index ad infinitum you will perpetually be the cause of further inflation, which will be followed by still higher wages. It’s circular logic that you are putting forward.
Well said. The problem is a) a higher wage of $X is not going to universally fit in every area, and b) the era concept of a living wage is by definition a moving target.
Even if a wage is set to be considerably higher, then what is the first thing to happen? New hires – often the least skilled and/or entry level work – drop off to save budget. So less jobs for the unskilled and new. Then, existing employees receive a pay increase to meet he new standard, especially those with more skills but now making just minimum wage.
Where does the money come from? Hmm, I’d expect higher prices for the goods and services, since the owner isn’t necessarily an evil demon screwing everyone and making millions…Thusly, prices go up. Now the “living wage” is no longer a living wage…because the price of just about everything – from haircuts to milk to city water just increased. And so on and so forth. Hello Inflation – and not the good kind.
And, just to add, certain areas are not going to allow you to live there, even with the minimum wage increase…LA, San Fran, NYC, Cambridge, etc. sorry, not going to be able to afford it. It’s a problem, but it won’t be fixed by a wage increase.
The human capital you mention is so critical: instilling or unveiling the desire to create, to be productive, hope, and confidence in the means to change one’s own future are more critical than a wage increase. Folks not working would benefit the most, whether or not their “income” actually changed. Just my 2 cents.
An example is: where I live junk, trash and more junk in the yards, around houses (trailers, very old if not practically rigged to be stuck to the mountain). The issue is not simply lack of wage. It costs so little to live that way. The issue is lack of vision and tools for how to get there (life skills), improve health, family planning, education etc.
I’m sorry, what was this blog entry about? Lol
Even better said!
Employees never pay any kind of unemployment tax. Employers pay all of that. Nobody is getting their own money back, they are getting paid with their former employer’s taxes, and sometimes some federal tax money.
There are some people I know personally, who told me directly, they would rather receive unemployment than work at a job. It is true that some jobs pay too little. I think the minimum wage should be more than unemployment payments.
Well, you all should start a business in Retail grocery, Burger joint, Pizza and start paying your workers to flip burger and stock shelves $30 per/hour. You all are all talk and no action.
I am sure the plumber will continue to charge only ($200) per visit, or the auto mechanic will still charge a $100 rate/hr…
Burritos will cost $20 and ice-cream cones $10.
I have a home services agency. Any increase in caregiver pay is passed directly onto my clients who are older people living on limited incomes.