September surge?

Many business owners expect the end of supplemental unemployment benefits to end the labor shortage, but the effects may be muted

Daniel J. Munoz//August 30, 2021

September surge?

Many business owners expect the end of supplemental unemployment benefits to end the labor shortage, but the effects may be muted

Daniel J. Munoz//August 30, 2021

Gillian's Wonderland Pier.

In the next week, one of the most intensely debated unemployment benefits – the $300 weekly bonus from the federal government – is set to expire. Other benefits that expire around the week ending Sept. 6, include a 13-week extension on jobless benefits, and a federal unemployment insurance program for non-traditional workers hit hard by the pandemic, such as sole proprietors, freelancers and independent contractors.

Business owners and conservative lawmakers argue that the lapse in that added money could alleviate labor shortages, especially in the restaurant industry. “We are basically desperate for the unemployment to end so that we can start to receive job candidates again,” said Travis Semblewski, owner of Vic’s Italian Restaurant in Bradley Beach, a Shore town. “Even though it’s going to occur after summer, we still have positions to fill.”

But economists and state leaders have cautioned that the labor shortage has several causes. And any policy decision will likely take months to have any kind of effect. “It was one of many contributors to this challenge,” Gov. Phil Murphy said during a regular COVID-19 press briefing on Aug. 2. Workers seeking to “up-sell” and “up-skill,” or leave a previous place of work after a negative experience, Murphy said, have also fueled the shortage.

Regina Egea, who heads the right-leaning think tank Garden State Initiative, pointed to New Jersey’s particularly high unemployment rate, 7.3%, saying it meant the state still has considerable work to do. “Nearly every retailer has ‘Help Wanted’ signs and frequent reduction of hours of operation due to labor shortages,” she said in an email.

Ending the benefits

New Jersey is among about half the states that have not opted out of the $300 per week, which is outlined under what’s called the Federal Pandemic Compensation supplement. Twenty-six states, all led by Republicans, have cut off the weekly check in a bid to end the hiring problems.

The effects of those moves were limited, according to a joint study prepared by researchers at Harvard and Columbia universities, the University of Massachusetts Amherst and the University of Toronto. States that cut off the benefits saw their employment rates jump 4.4% compared to states that kept the benefits.

The study compared 18,648 claims in states that cut off the benefit and where it is still in place, using data from late April through August. The researchers found that even out of eight people who saw their benefits cut still did not find employment afterward.

Vineeta Kapahi, analyst, New Jersey Policy Perspective

“[T]aking away benefits does not spur job growth, but it does make it much harder for families to put food on the table,” said Vineeta Kapahi, an analyst at the progressive think tank New Jersey Policy Perspective. “Too many workers continue to face the impossible choice of exposing themselves to COVID-19 or losing income, while many others are struggling to juggle caregiving responsibilities with work.”

But Semblewski said he heard from many employees who felt that “the benefits are too good to pass up and that they want to return when they expire.” “We look forward to the impending expiration of the expanded unemployment benefits as well as regular unemployment,” he said. “You will see a surge in the labor force once it all expires.”

Roughly 500,000 New Jerseyans are collecting the added $300 per week. Under federal guidance, states are allowed to use funds from the American Rescue Plan to extend the unemployment programs past the Labor Day expiration. Murphy has not said whether New Jersey would take that route. His office along with the New Jersey Department of Labor and Workforce Development – which runs the program – have not responded to multiple emails seeking comment.

Other factors

Michele Siekerka, president and CEO, NJBIA.

New Jersey Business & Industry Association CEO Michele Siekerka said the hiring shortage was essentially a “perfect storm” of different factors working together and worsened by the added unemployment relief. Lack of access to child care, for one, is keeping many parents simply unable to get into the workplace, Siekerka said.

Egea agreed that any single policy decision at this point would not be enough to make a dent in the unemployment rate and get more New Jerseyans back to work.

Kevin Brown, New Jersey state director for 32BJ SEIU, which represents thousands of service workers in the state, contended that concerns about worker safety during the pandemic kept people home. “Employers cut corners where they can, and while they may provide some [personal protective equipment], it may not be enough or with adequate frequency,” he said in May as the shortages in workers made headlines nationwide. “There is a labor shortage because some employers are not even paying standard wage, taking away benefits. People can’t work in those conditions.”

In July, the NJBIA issued ten proposals meant to reverse the hiring shortage. Some could be adopted via executive action. Others needed the support of a state Legislature in recess and with all 120 members on the campaign trail.

For one, the state could tighten enforcement of its “available for work” requirement, and open up channels for employers to report potential violations. Access to childcare should be improved and labor laws for teenagers could be loosened so that they could work more hours. In addition, the state could provide a lump sum of the weekly federal relief for those who immediately return to work.

Just before the Independence Day weekend, Murphy signed a bill allowing those ages 16 and 17 to work up to 50 hours a week, though that expires on Sept. 6. And state lawmakers are proposing a series of tax credits to help businesses with the added costs, such as the use of hiring bonuses or increased pay, to hire back workers.

U.S. Rep. Josh Gottheimer, a Democrat from Bergen County, is asking Murphy to use some of the state’s federal aid to pay $500 back-to-work bonuses. Additionally, the proposed New Workers Act in Congress would allow individuals to collect $180 a week in benefits after finding a job.

The delta drag

James Hughes, an economist at Rutgers University, said the delta variant is a significant drag on the national and state economy. Return-to-office plans, necessary for the economic recovery of many communities, have already been delayed past their original September goals.

James Hughes, professor and former dean at Rutgers University’s Edward J. Bloustein School of Planning and Public Policy.

“The economic ecosystem that surrounded offices in Newark, in Jersey City, the restaurants that service daytime workers and the like … was pummeled by the closing down of a lot of white-collar office facilities,” Hughes said. “That’s a source of a lot of jobs that are still lagging behind.” The job reports for July, which reflected steady gains, are “ancient history right now.”

All other indicators “suggest that August, things are slowing down again because of the COVID variant. It’s not derailing growth, but it’s slowing it,” Hughes said.

Still, Hughes suggested that the $300 a month creates spending power necessary to keep the economy moving. In fact, after the added $600 in weekly federal relief lapsed last year, New Jersey State Treasury Officials recorded a drop in sales tax revenue as spending slowed.

The potential effect of renewed restrictions such as reduced capacity, mask requirements or mandated closures is “way too speculative,” Egea said. She and Siekerka both said new restrictions would be unnecessary given the collective knowledge gained about the virus. “I don’t think there would be a need to be shutting down our economy again given the mitigants we have, and the fact that we need to operate within the confines of what we have,” Siekerka said.