Businesses in Alaska complain they’re having a hard time finding workers as pandemic restrictions ease. Some say generous unemployment benefits are to blame.
Montana’s governor announced this week the state would end enhanced unemployment payments — seen by many as an incentive not to work — and instead offer a one-time bonus to people reentering the workforce.
So is it true that bigger unemployment payments have caused people to stay home?
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Research suggests no, at least not entirely, says Nolan Klouda, director of the University of Alaska Anchorage Center for Economic Development.
But, as Klouda told Alaska Public Media’s Casey Grove, he’s still hearing from many Alaska business owners who believe that’s the problem.
Read a full transcript of the interview with minor edits for clarity.
Nolan Klouda: That’s a widespread belief: The reason why people aren’t applying or coming back to work is because the benefits are so generous, so lucrative, that it’s an incentive for people not to go to work when jobs are available. That is definitely the claim. And that’s disputed by a lot of academic research.
Casey Grove: So tell me about that. How do you even look at this sort of thing? And what have you seen in the research?
NK: There’s been quite a body of research now that looked specifically at the issue of the $600 increase in unemployment benefits that happened following the CARES Act last year in 2020.
Economists tracked the workers who received those benefits to look at whether they took work when offered, compared with people that weren’t on unemployment. They tended to take jobs when offered at similar rates.
When economists looked at when the overall benefits expired at the end of July of 2020, you didn’t see any kind of spike in employment happening at that point. When the generous benefits expired, if those payments were keeping people home, then you’d expect people to suddenly go back to work in droves after that. That really didn’t happen.
There are plenty of differences between states and how much they pay: More generous states versus less generous states. And yet, you see similar labor market dynamics happening in all those places. Also, these studies were mostly looking at the $600 increase. Right now, the extra benefit is $300 per week. So it’s generous, but it’s less generous. So, if people weren’t staying home because of the $600, why would they be staying home because of a smaller amount of $300? There’s just a lot of complications around that story.
CG: If we can’t explain it with maybe just this one simple idea, then what is going on? I mean, what are the different factors that you think may have led to this problem with finding workers?
NK: There are a couple of ideas that have been offered by economists.
One is that there are still people who are caretaking for others, like a young child. Daycare capacity is still not back to 100% here in Alaska, and really anywhere else. So you may have situations where people are not able to go back into the labor force because they’re taking care of children, or have elderly parents, or so forth.
You also still have people that have more sensitive health conditions. A lot of businesses saying they’re not getting workers are businesses like restaurants that have higher exposure risk. As more people get vaccinated, I would expect that to be less of a concern. But as you know, in the most recent data, there are still quite a few people at least nationally saying they’re not willing to return to work because of the risk of getting sick.
Another factor that is maybe more Alaska-specific is that we depend on a large seasonal influx of workers from out of state every summer. Think about hospitality, seafood processing, think about construction — there are workers who are nonresidents who come to work in Alaska every summer. And right now is when businesses that hire seasonally are ramping up. So, if people are less willing to travel to Alaska, then it’s possible that we have a bit of a shortage from that.
So there are various kinds of ideas out there about why workers are staying home and I think it’s probably some combination of factors.