Moneybox

Are Unemployment Benefits Really Making It Impossible for Restaurants to Hire?

People sit at tables in an outdoor dining area
Dining outside Yankee Stadium in the Bronx on April 1, the opening day of baseball season. Spencer Platt/Getty Images

With spring in bloom and millions of Americans getting vaccinated by the day, business has started picking back up for America’s financially battered restaurants. There’s just one problem: They can’t find enough hands to hire. That, anyway, is what’s been reported in a raft of articles describing an industrywide labor shortage that’s challenged eateries across the U.S. and even forced some to close, right when it seemed they’d reached the light at the end of COVID’s long, dark tunnel. Restaurants have been especially troubled by a lack of back-of-house staff like line cooks; after all, you can’t serve food if nobody’s in the kitchen.

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Many business owners (and journalists) have been quick to blame this difficult hiring environment on the federal unemployment benefits that the Biden administration extended through Sept. 6 as part of its coronavirus relief legislation. The law provides an additional $300 per week to recipients on top of their state aid, and in some instances, the combined amount is more than some establishments can afford to pay. As one restaurateur in California told the New York Times: “You have some cases where it’s more profitable to not work than to work, and you can’t really fault people for wanting to hold on to that as long as possible.”

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One common response to these kinds of stories from left-wing corners of Twitter is that, if employers are having trouble hiring workers, they should simply raise pay. But that’s much easier snarked about than done; restaurants tend to run on low margins and often have trouble raising their prices, and jacking up wages immediately isn’t necessarily a realistic option (there’s a reason most proposals for minimum wage increases are phased in over years).

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The problem with this narrative is that it might be flat-out wrong. It’s not actually clear that unemployment benefits are keeping a large number of Americans from going back to work. Aside from the anecdotal accounts—which do carry some weight—the evidence is a little spotty at this point, and there may well be other more important factors at play, mostly having to do with the horrific plague that hasn’t actually disappeared yet, even if spring breakers in Miami Beach and Trump voters in North Dakota sometimes act like it has. Let’s break down the possibilities.

The Case for Blaming Unemployment Insurance

Republicans in Congress spent much of 2020 arguing that generous unemployment benefits were slowing down the nation’s economic recovery by making it harder for businesses to rehire. But economists who looked at the issue consistently found that didn’t seem to be the case. A paper by the University of Pennsylvania’s Ioana Marinescu, the Federal Reserve’s Daphné Skandalis, and Glassdoor in-house economist Daniel Zhao offered the simplest, most compelling explanation: After Congress boosted unemployment payments in last year’s CARES Act, job searches did drop, as one would expect. But thanks to the pandemic, job openings fell more, so the businesses that were trying to hire had no shortage of workers to choose from.

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The situation appears to be a bit different now. Online job openings are now higher than they were pre-COVID, according to an analysis from the headhunting site ZipRecruiter. At the same time, job search activity, measured by Google Trends, seems to be down since March, when Democrats passed their relief bill, as Glassdoor’s Zhao has pointed out.

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That timeline is roughly consistent with the idea that unemployment benefits might be keeping some people at home. The fact that the extra $300 per month had originally been scheduled to expire in March might have motivated people to search for jobs in the late winter. But once it became clear that Democrats would extend benefits for almost six months more, some individuals may have decided not to rush. The Biden administration also made it a bit easier to remain jobless back in February, when it released a new rule allowing people to turn down job offers for safety reasons and still keep their unemployment benefits.

The Case Against Blaming Unemployment Insurance

But the data don’t quite tell so clean a story. First, it’s not clear how much of a hiring crunch actually exists. Reports of hiring shortages crop up with pretty much every economic recovery, as employers get used to the new normal, and the media’s bias toward conflict and negativity tends to play these accounts up. But the U.S. managed to add a whopping 916,000 jobs in March, including 176,000 in restaurants, fast-food chains, and bars. That hiring largely occurred before Democrats passed their coronavirus bill, but it suggests that unemployment benefits hadn’t exactly frozen the job market. What’s more, University of Massachusetts Amherst economist Arindrajit Dube has found that, at least through March, states with less generous unemployment benefits haven’t seen their job markets rebound any faster, suggesting that jobless benefits may be having a limited impact on the overall speed of hiring.

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Finally, the Department of Labor reported on Thursday that 1.2 million Americans left the unemployment rolls between March 20 and March 27. It appears plenty of people are ready and willing to return to work.

Insofar as some Americans are choosing to stay home rather than search for a job, it’s unclear how many are doing so because they can make more on unemployment, and how many are doing so because they’re afraid of catching a potentially deadly virus. The vaccine effort may be ramping up, but the majority of adults aren’t fully inoculated yet, and in some locales like D.C., restaurant workers only recently became eligible for a shot. Some food industry veterans, like this bartender interviewed by Washington City Paper, simply aren’t comfortable risking their health yet:

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D.C. bartender Christian Kerekes got his first vaccine on April 8. “I started looking for a job right away,” he says. “Fuck unemployment.” He vowed not to work until he was vaccinated because he has asthma. “I can’t be around risky situations like that,” he says. “Until I’m fully vaccinated, or at least half vaccinated, I won’t feel comfortable giving my all in a restaurant environment.” 

He’s frustrated by the conversations he’s overheard about how it’s time to come off unemployment. “We don’t have the vaccine yet so we can’t go back to work,” Kerekes says. Some District residents have been so dismayed by the waiting game that they’ve driven to other states to get shots. “You’re genuinely wanting to get back to your passion or career but you’re unable to because of reasons that are outside of your reach,” Kerekes says.

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The other lingering factor to consider is that many parents still have child care responsibilities because schools remain closed, which may be keeping them from taking jobs.

Insofar as unemployment benefits allow people to stay home and stay safe until they’re vaccinated, that’s a good thing. Moreover, if people are still staying away from work mostly because of the pandemic, and not because they want to take a government-funded vacation, it means that we should expect whatever hiring crunch that currently exists to ease up as more adults get a shot. At our current pace, the New York Times projects that every adult could receive at least one jab by late June, meaning we should have a much clearer picture by then. If the generosity of unemployment insurance seems to be holding up the economic recovery by then, it might be time for Congress to think of a change in policy. (One idea that’s been floated is to offer workers a “back-to-work bonus” by allowing them to collect some of the unemployment benefits they would have received even if they take a job.)

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I asked Glassdoor’s Zhao what he thought the most likely reason was that some businesses seem to be having trouble hiring at the moment. “I think the largest factor right now is the pandemic,” rather than unemployment benefits, he told me. But he added that the jury was still basically out, and that it’s entirely possible the issues the media is focused on could be “moot” in a few months.

“It’s not very exciting to hear,” Zhao said, “but I think this is a place where we need to wait and see where the evidence evolves.” Once you’re vaxxed, I suggest waiting by the bar.

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