The pandemic has changed our economic landscape in ways we still do not fully comprehend. It has brought about a labor market change never before been experienced. For once, it is a workers’ market. We ended 2021 with a 3.9% unemployment rate, the lowest it has been since February 2020, nearly two years after the start of the pandemic.
These numbers are encouraging. However, the Labor Force Participation Rate is still down to 61.9%, according to the December 2021 BLS report, compared the pre-pandemic rate of 63.4%. This is equivalent to 2.54 million workers not currently in the workforce.
In the first week of February 2022, ADP Research Institute reported a total of 301,000 jobs lost for private sector positions. A concerning trend when they were predicting a gain of 207,000. Though we are still down 3.6 million jobs from pre-pandemic levels, over 18.8 million have been added back since the lowest point in April 2020.
For all the jobs added over the last two years, it still begs the question of why employers are struggling to fill positions. The answer is multi-faceted, and as unbiased as we try to remain, some of it has become politicized. Below are a few items of note.
Vaccine mandate departures
Vaccination-related employee departures are quickly totaling into the thousands. Hospitals around the country, including the Mayo Clinic, released 700 employees this January for refusing the vaccine. Last year, Washington state reported that1,900 state workers have quit or have been fired for refusing the vaccine. Even after President Joe Biden’s vaccine mandate for large employers was blocked from taking effect, many companies continue to make their own rules on vaccines and masking.
The debate over minimum wage
In many places, minimum wage has not kept up with the rising cost of living or the inflation rate. Since 2009, federal minimum wage has remained inert at the current rate of $7.25 an hour. However, the inflation has increased almost 7% since 2009. Coupled with the fact that today’s prices are 1.3x higher, a dollar today only buys around 77% of what it could buy in 2009.
While not required, 21 states and Washington D.C. have set a state minimum wage above the federal minimum. California and Washington D.C. have managed to hit the coveted $15 mark.
On the top 20 list of countries by minimum wage, the United States ranks #17. The fight to raise the federal minimum wage has reached yet another unsatisfying end with lawmakers’ failure to reach a collaborative agreement. This has left private employers and large corporations to pick up the slack.
Large corporations who were once criticized for underpaying their employees have now stepped up their starting wages in the hopes of attracting more workers.
- Amazon: All U.S. employees starting wage is $15 per hour with an average of $18 per hour.
- Costco: Introduced a $15 per hour starting pay in 2019 and now pays all employees a starting wage of $16 an hour. More than half of its hourly workers are paid above $25 an hour.
- Hobby Lobby: Full-time workers are now making $18.50 as of January 1, up from $17 last year.
- Target: In July, Target raised its minimum wage to $15 an hour and offers its front-line workers a $200 bonus.
Major U.S. Distributors and their starting wages
According to an August CNBC article, fast-food wages climbed 10% in the second quarter of 2021. Several fast-food chains have been able to entice workers with higher wages and with a minimal increase in menu prices. McDonald’s entry-level employees are starting at $11 to $17 per hour and many locations have also started free childcare. Taco Bell and Pizza Hut locations are giving their employees more paid time off and free family meals. Chipotle increased their wages from $13 to $15 per hour and hiked menu prices up between 3.5% and 4%.
Starbucks is raising their average wage to $17 per hour by summer of 2022. It’s currently at $15, which is a year ahead of schedule. The company is also awarding its tenured workers, with two or more years of service, a raise up to 5%. Employees with five or more years could receive up to a 10% raise by the end of January 2022. Starbucks is also rolling out a more robust benefits plan including paid sick leave, childcare and elder care benefits, family planning reimbursements and mental health support.
The great resignation
U.S. workers left their jobs in record numbers last year. In all of 2021, 69 million workers left their jobs.
The data doesn’t include retirements, but includes people who quit their jobs for any number of reasons or were laid off. Currently, many people are quitting to take a job elsewhere, go back to school, leaving to care for a family member or children.
Certain industries are churning more workers than others. People left healthcare, retail and food services at especially high rates at the end of the summer. Workers also left jobs at an accelerating pace across the Midwest and South. Texas and Florida have a high concentration of the industries seeing the greatest churn, including travel and hospitality.
As of the late 2021, 50% of U.S. adults 55 and older said they were out of the labor force due to retirement, according to a Pew Research Center report. This is compared to 48% of those adults who were retired before the pandemic.
Another factor are those leaving to work for themselves. The US Census Bureau reported 5.4 million new business applications were filed in 2021, compared to the record 4.4 million in 2020 record. For comparison, in 2019, there were only 3.5 million new business applications.
A workforce burned out
Two years into the pandemic, employees across the globe are tired. According to a recent study, two thirds of workers have reported an increase in burnout due to the pandemic.
Frontline and essential workers are exhausted, scared, and tired. They’re overworked, greatly underpaid and underappreciated. While COVID-19 cases are finally starting to slow, there are still large swaths of the country affected by the Omicron variant.
This prolonged period of uncertainty has made many reexamine the role their employers play in making matters worse. This is resulting in record numbers of workers leaving jobs in search of better options.
The impact of childcare
Every aspect of daily life has been touched by this virus. And if you are the parent of a school age child, your routine has most likely been altered beyond recognition.
One-third of the childcare industry was lost at the onset of the pandemic. The industry is still straggling with a slow and incomplete recovery. In this sector, 4,500 jobs were lost from September through November and an estimated 3,700 more predicted to be lost in December. With so few childcare workers and the rising cost of living without an meaningful increase in most wages, parents are often forced to choose between working or taking care of their children. This is especially true of women, who left the workforce in record numbers due to the pandemic
Child Day Care Service Employees (Thousands)
The road to recovery
While our economy has nearly recovered to pre-pandemic levels, we still have a long way to go until we are completely restored. Moody’s Analytics shows the U.S. at 91% on its back to normal index. This index is comprised of 37 national and seven state level indicators, which represent the economy returning to its pre-pandemic level in March 2022.
Moody's Analytics Back-to-Normal Index
Each of these outliers above are just one symptom of an overall disease that plagues our economic ecosystem. Having open dialogues and advocating for changes that will improve the lives of the worker and employers will go a long way to finding the cure.