As COVID-19 restrictions begin to subside, the current labor market is showing that workers are still waiting to rejoin the workforce, despite increased demands for labor from business owners. Some are blaming enhanced unemployment benefits as the source of the shortage, to the point where more than 20 states are rolling back federal pandemic unemployment compensation. Economist Aaron Sojourner disagrees with this reasoning, and says the larger issue in the minds of prospective workers are concerns for public health.
“There’s just a lot of adjustment in the labor market and the economy right now. These are not Economics 101, where everything just works out like we expect them to … People need to learn how to trust each other again.” –Aaron Sojourner, University of Minnesota Carlson School of Management
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Aaron Sojourner is a labor economist and associate professor at the University of Minnesota Carlson School of Management. He says enhanced unemployment compensation is not necessarily the source of the labor shortage, despite claims from business owners and politicians. “That argument held also last year when there were a series of studies done … on how much these enhanced benefits are affecting [ability to hire more workers]. Those studies showed little correlation.”
Sojourner says the current economic shocks in the labor market are painful, but they are temporary. “Public health concerns and concerns for your family and your health are still top of mind for people. And those conditions should change in the next couple of months.”
Many businesses are having to hire entirely new teams of staff, which is adding to employers’ hesitations to raising wages, according to Sojourner. “There’s just a lot of adjustment in the labor market and the economy right now. These are not Economics 101, where everything just works out like we expect them to … People need to learn how to trust each other again.” Sojourner says people should think of labor shortages more as wage shortages. “It’s not as simple as raising wages for the new person. It can also cut into employers’ profits because they have to raise wages for everyone else too.”