January 2021, Volume 27, Number 1
The unemployment rate fell below seven percent in Fall 2020, ending the year at 6.7 percent. Almost 159 million Americans were employed in February 2020, and 150 million were employed in December 2020. Nonfarm wage and salary employment fell from 152 in February 2020 to 143 million in December 2020.
The loss of nine million jobs in 2020 exceeded the drop in employment of five million in 2009.
Women’s labor force participation fell due to job losses in services such as leisure and hospitality and the need to care for children as schools closed. Hiring for the 2020 holiday season was concentrated in warehouses and customer service centers rather than in retail outlets. The US Travel Association estimated that half of the nine million people employed in the US travel industry lost their jobs by the end of 2020.
The federal government in spring 2020 provided $2,000 per person stimulus checks to persons with adjusted gross incomes of less than $75,000 in 2019, and another $600 per person was sent in January 2021. About 20 million laid-off workers were collecting unemployment benefits at the end of 2020 that included state payments plus $300 a week in federal benefits.
California’s minimum wage rose to $14 an hour for employers with 26 or more employees on January 1, 2021, and will increase to $15 an hour on January 1, 2022. The federal minimum wage has been $7.25 since 2009. The Biden administration is expected to push for a $15 minimum wage, which could raise wages for 17 million workers directly and another 10 million workers who now earn slightly more. Employment could fall by 1.3 million due to the higher minimum wage.
Wal-mart is the largest private US employer, with 2.2 million employees. Amazon, the second-largest US employer with 1.1 million employees, is expanding its employment faster than any other large private employer. Over 85 percent of Amazon’s 800,000 US employees work in warehouses, earning at least $15 an hour, above the $13 average pay of retail workers. Amazon also has another 500,000 delivery workers who are independent contractors rather than employees.
Covid is accelerating changes already underway, including the automation of jobs at all rungs of the job ladder. However, for the two-thirds of US workers without a college degree, the threat of job loss is aggravated by falling real wages that peaked in 1985 and have since fallen by 10 to 20 percent. The US has larger wage gaps, fewer high-quality jobs, and less intergenerational mobility than other OECD countries.
Automation will replace workers with machines, but at a slower pace than many fear. Robots learn from data and repetition, but they are slow to learn enough to operate self-driving cars and to operate warehouses without human assistance. The key to helping workers who are displaced by machines is to link their training to the skills employers are seeking, as exemplified by the certificates issued by IBM, Google and other firms that train workers to repair machines that are filled with electronics.
Covid may slow the movement of older Americans into nursing homes, which were the sources of many Covid cases and deaths. Some 1.3 million Americans lived in nursing homes at the beginning of 2020, but that number fell as more families decided to keep elderly relatives at home, often utilizing in-home care aides and telemedicine. Covid is likely to spur the expansion of home-health care businesses and shrink nursing homes.
Covid benefitted many professionals who could work remotely, allowing them to maintain their earnings while saving on commuting and other costs. Lower-skilled essential workers, on the other hand, had to continue working in person, sometimes earning bonuses. Many lower skilled service workers lost their jobs, so that Covid increased inequality, benefitting some Americans while hurting others.
Franchisors develop concepts to provide goods and services, and entice franchisees to invest in the concept, buy supplies from the franchisor, and adhere to terms that make the customer experience similar across all McDonald’s or Holiday Inns. The 774,000 US franchised establishments that operate, for instance, 85 percent of US chain restaurants and 55 percent of US hotels, employ 8.4 million workers.
More franchisees are suing franchisors, arguing that the master brand requires too much spending or charges too much for supplies. Some franchisees have sued master brands, alleging they charge too much in royalties for developing the concept.
DOL in December 2020 allowed restaurants to pool and distribute tips between both front- and back-of-the-house workers if wait staff received at least the standard state or local minimum wage. Some wait staff believe that sharing tips will reduce their hourly earnings.
H-1B. There are 85,000 H-1B visas available to for-profit employers, including 20,000 for foreigners with advanced degrees. Employers request far more, about 200,000 a year, and USCIS allocates the H-1B visas by lottery. USCIS in October 2020 proposed to allocate H-1B visas on the basis of salary, with the highest-paid workers in each occupation and area receiving priority for scarce visas.
Many H-1B visas go to outsourcers such as Infosys, an IT firm based in India that uses H-1B workers to take over a US’s firm’s computer services, with backup from other employees in India. US employers say that they need to hire the best and brightest global talent to remain competitive, while critics allege that H-1B visas allow employers to replace US IT workers with Indians and reduce their labor costs.
The DOJ sued Facebook in December 2020, alleging that the social media company refused to hire 2,600 US workers in order to hire or retain H-1B foreigners who were being sponsored for immigrant visas. To obtain immigrant visas, employers must demonstrate that US workers are not available to fill the job in question. According to DOJ, Facebook did not try to recruit US workers for the positions it wanted to fill with sponsored foreign workers.
Education. Students and their parents have borrowed $1.7 trillion from the federal government to attend one of the 6,000 US colleges and schools that accept federal aid. A November 2020 analysis concluded that the federal government will recoup less than $1 trillion in repayments, as students default or elect to join a repayment program that allows the repayment of education loans with a maximum 10 percent of the borrower’s discretionary income, defined as adjusted gross income minus 150 percent of the federal poverty line. Loan balances are forgiven after 10, 20 or 25 years.
Students borrow about $100 billion a year from the federal government for higher education, with a maximum $31,000 a year for undergraduates, but no limits for Parent PLUS or graduate student loans. Over the last decade, 40 percent of student loans went to borrowers with credit scores below the subprime threshold of 620. Critics say that easy access to federal credit encouraged colleges and schools to raise tuition faster than inflation.
Medicaid provides health services to low-income residents. Enrollment expanded under the 2010 Affordable Care Act when the federal government reimbursed states for 90 percent of the cost of new enrollees, up from the usual 50-50 federal-state cost split. Medicaid expanded again toward 70 million participants at the end of 2020 as a result of the covid pandemic and more people who lost jobs and income and thus qualified for coverage. State governments spent an average 30 percent of their budgets on Medicaid in 2018.
Social Security is running out of money, as higher unemployment confronts an aging society. Employers and employees pay 12.4 percent of earnings up to $137,700 a year; President-elect Biden wants to require those earning over $400,000 to pay Social Security taxes on their high earnings. Some 178 million people contributed to Social Security in 2020, and 46 million received $70 billion in Social Security benefits, an average of $1,500 a month.