Government data shows unemployment is dropping and nearing pre-pandemic numbers.
But the volume of “Now hiring” signs around town and increased employment advertising indicates employers in many business sectors are struggling to fill open positions.
The apparent labor shortage stems from several factors, including fewer people applying for jobs because of expanded unemployment benefits, say some local employers. However, a labor economist said studies clearly refute that. People may still have concerns over being exposed to COVID-19 despite increased vaccinations, while others may remain at home because they lack child care or are supervising online schooling for young family members.
For Todd Hein, president of Terre Haute-based Labor Link, the current shortage is simple — “There’s too much free money sitting out there to stay home,” he said.
Hein specifically addressed unemployment benefits, with Hoosiers typically getting about $298 a week, plus an additional $300 in pandemic-related funds. “That is hard to compete with and it seems equivalent to about $15 an hour,” he said.
As an example, Hein said his company “had an employee who called in and wanted a pay stub to continue his unemployment when the job that he was laid off from would like to have him back and is hiring,” Hein said. “The government is my main competitor right now,” he said.
“I have never seen anything like this,” he said.
Some companies are giving $1 an hour incentives and $2 for night shifts, raising their $14 hourly rate to $15 for days and $16 for evenings, Hein said.
“We have had other clients raise their pay from $11 to $14,” Hein said. In addition, Labor Link is giving workers a $40 per week bonus if workers complete their full work schedule, “which is the equivalent of a dollar an hour bonus,” Hein said.
However, getting people to accept employment remains a challenge.
“We did a four-hour job fair (on April 27) and had zero people show up,” Hein said of a recent event at a manufacturing facility. “It was set up at their site, it was advertised and was on TV, and nobody showed up.”
However, Hein said he thinks the labor market will not stay like this for long.
“My gut feeling is it will be around June 1 when you start seeing things open back up. Eventually stimulus money and unemployment will run out,” he said.
Lisa Lee, executive director for the Western Indiana Workforce Development Board, Inc., said that while many companies are seeking employees, the Wabash Valley still has a strong workforce.
Lee said unemployment data supports employment rates are improving.
”The Terre Haute MSA (Metropolitan Service Area — which includes Clay, Sullivan, Vermillion and Vigo counties) unemployment rate for March 2021 (not seasonally adjusted) was 5.4%; compared to 4.7% for the Terre Haute MSA in March of 2020. So, obviously we are moving ever closer to the area’s pre-pandemic rates,” Lee said.
The March figures, released this month by the Indiana Department of Workforce Development, is the most current statistical data.
”And, Indiana’s unemployment rate of 3.9% (seasonally adjusted for March) is lower than any other surrounding state. This improvement is especially impressive when you compare the latest data to that of May 2020 when the Terre Haute MSA unemployment rate (not seasonally adjusted) was 11.8%, and Indiana’s unemployment rate was at 12.3%,” Lee said.
Lee said some people may not yet be re-entering the workforce.
”There are still people afraid to come back due to COVID and others feel a need to be home with their children, so it is a combination of things,” Lee said of the current workforce.
”There are lots of people hiring right now and it is a great time to enter the workforce,” Lee said. “Certainly manufacturers are looking for workers and there will be growth and expansion in the local area, so that (need for workers) will continue for some time.
”It is bumpy right now, but we still have a strong workforce,” Lee said. “There are always people who are unemployed who might be willing to move to different occupations. We also have more than 6,000 people who commute into Vigo County, so that is a big labor force too that is available.”
”I think we will weather the storm just fine,” Lee said. “As vaccinations pick up and people are more comfortable to be near each other, I think things will pick up in the summer and into the fall.”
To attract workers, plastics recycler Revolution, through its Terre Haute firm Jadcore, A Revolution Brand, took out a full-page newspaper ad for a job fair, using a food truck to provide lunch for a hiring event earlier this week.
”We have raised our starting pay,” starting the week of April 19, raising the hourly wage to $14 from $12 for entry-level openings, said Rob Doti, president of the company.
Additionally, the company increased recruitment bonuses, now with a $1,000 bonus.
”If you go back two years ago, our incentive program was if you referred a friend, you get $50 and if that (friend) stays for 90 days, they get $50. Last year we changed that to $100 and $100 and then last fall we changed that to $500 and $500,” Doti said. “And now, we have if you refer a friend and they stay 90 days, you get $500 and if your friend takes the job and stays 30 days, he gets $500 and if he stays another 60 days, for a total of 90 days, he gets another $500.
”So, if you take the job and stay 90 days, you get $1,000,” Doti said.
The company has 40 open positions, seeking maintenance technicians, production operators and shipping.
Prior to the pandemic, the company usually had 10 or less job openings in its workforce of 230. Plus the company “had a bullpen of applicants, usually 20 to 25 applicants a week,” Doti said.
”Now, we have no applicants,” Doti said. “It is not like we are not getting qualified people, it is that no one is applying for the job. You got to do something to lure them in. Our new owners, Revolution, are fighting the same problem across the country at all of their plants.”
George Azar, owner of the Saratoga Restaurant, said he has counted between 16 and 20 signs for help wanted from Wabash Avenue south to Haute City Center mall in Terre Haute.
”I have not seen it this bad in a long time,” he said of companies openly seeking workers.
Azar said his business turned to social media to attract workers. Especially as several college workers are now moving on after graduation this month, he said, and some employees moving to other states.
”We would have 15 or 20 people write back to say they will come in for an interview, but then they don’t come in,” Azar said of job postings. “I don’t know the reason, maybe they found another job. The restaurant business was hit pretty hard during the pandemic and many businesses lost employees. Some of those likely went out and got other jobs, I would assume.
”And I think some people are just staying on unemployment. It’s just a guess on my part, but it seems to be getting worse on staffing. Business is getting better, staffing isn’t,” he said.
Yet Azar said he is fortunate as his family-run business has longtime employees, several working at least a decade, with one employee working at the restaurant for 25 years. And the pandemic changed his business model, resulting in an expansion of an outdoor eating area, fenced off on sidewalks with heaters to attract patrons.
”Thank god we have family who can pitch in and we have a great crew and staff that is dedicated and come into work,” Azar said.
Finding workers right now means drawing from a smaller labor pool, said Robert Guell, professor of economics at Indiana State University.
The labor participation rate — the amount of people age 16 and older employed or looking for work — dropped from 63.4 percent prior to the COVID-19 pandemic to 60.2 percent in April 2020, Guell said.
”So you had a whole lot of people leave the labor force,” Guell said. “They didn’t just go and become unemployed, they left the labor force as a result of the pandemic. They went from being employed or looking for work to not even being counted.”
That, Guell said, is one reason the national unemployment rate did not soar to near 20 percent, but instead peaked at 14.8 percent.
”You had so many people leave the workforce as a result of the pandemic. They were never in the denominator, which only includes people working or looking for work,” he said.
Many women have left the workforce due to the pandemic, he added.
”The vast majority of single parents who are custodial are women and with face-to-face school being so periodic ... it is extraordinarily difficult for a parent to navigate this kind of circumstance,” Guell said. “This will probably go through next school year, starting in August.”
According to the U.S. Bureau of Labor Statistics, there were 2.2 million fewer women in the labor force in October 2020 than there were in October 2019.
”So pre-pandemic, there were 158.7 million jobs and that dropped to 133.4 million” jobs during the pandemic, Guell said. And, he said, “the size of the labor force dropped from 164 million to 156 million. And that has only come back to 160 million.
”So that means 4 million people are out of the work force and there are 8 million fewer jobs. The extra 4 million are people still on unemployment. You count them as part of the labor force if you are collecting unemployment benefits,” he said.
”So there are 4 million people out there who were part of the labor force a year ago and are still not part of that labor force,” he said.
Guell said he thinks labor participation is down, in part, “because of the extra $300 and extended federal portion of unemployment compensation,” which extends through Labor Day.
”That was a terrible idea ... because we are at the point where people can return to work and if they can work, they should at least return to the searching for work,” Guell said. “By essentially subsidizing an extended leave of absence from the labor force, what is going to end up happening is wages will be driven up and so will prices, so we will see inflation as a result of this as employers will raise prices to pay those wages,” Guell said.
William Spriggs, chief economist for the AFL-CIO labor federation, disagrees, saying the national economy would have failed without unemployment benefits. Spriggs said there are numerous studies to show that unemployment benefits do not result in a labor shortage.
“It is not the unemployment insurance, that I can say unequivocally,” Spriggs said. “We have studied this ... there were five or six economic studies that were done and it got refuted.”
Under the Cares Act, when an extra unemployment benefit was at $600, it was cut off in July. And former President Trump “allowed states to use some of their Cares Act money to supplement unemployment benefits for some workers. So you have variations in which states added to the unemployment benefit, when they did it and the time horizon,” Spriggs said.
“Here we have the before and after of July and then we have states that did not add the money and none of those had any reaction to the unemployment rates,” Spriggs said. “It is all about demand for workers and searching for workers. It has absolutely positively zero to do with (unemployment insurance). It is like saying the election is a fraud.”
Unlike in times of full employment, when a worker can pass on a job and expect to find a better offer, unemployment insurance “is not a permanent income.
“It is not reasonable to think in this current labor market condition that a worker is really so endowed because of this extra $300 (under the extended American Rescue Plan Act) that they feel like (they) can continue to search forever because of that. That can’t. They know that,” he said of the 9.7 million still unemployed nationally as of April.
Spriggs added, “It would be nice if the money added to the unemployment benefits did what people think it is doing, which is to let workers hold out for higher wages.”
Referring to some Vigo County manufacturing firms raising wages, Spriggs said that “$14 is not a competitive manufacturing wage.”
“The average wage for manufacturing workers in the United States is $29 an hour,” Spriggs said. “When somebody tells me I am looking for manufacturing workers and I am offering $14 or $15, that to me is like saying I want to buy a Tesla and I want it for $12,000. I don’t understand why I can’t find one,” he said.
“No one will sell me a Tesla for $12,000? Oh my God, there is a shortage,” Spriggs said sarcastically, equating it to statements of employment.
Spriggs also said many companies tend to recruit using a network of friends and relatives “of people they hire.” That was disrupted in the pandemic. And while some companies received forgivable government loans to keep workers, others let workers go. And now those workers have taken other other jobs, moved or completely left the workforce.
“There are going to be firms that will have to adjust for a while. And, the new normal may be at higher wages than they were used to,” Spriggs said.