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October 2021, Volume 27, Number 4

Jobs, Wages, Covid

The US added 194,000 jobs in October 2021, the lowest monthly total in 2021, bringing US employment to 147.5 million, down five million from the 152.5 million people who were employed in February 2020. The unemployment rate was 4.8 percent.

The labor force participation rate, which was 63.3 percent in February 2020, dropped to 61.6 percent. Some 1.6 million workers cited Covid as a reason for not seeking jobs.

Wages. More employers are adopting a $15 minimum hourly wage, joining Amazon, Costco, Disney and Target. The average hourly earnings of non-supervisory workers in hotels and restaurants were $14 an hour in mid-2019, and topped $15 an hour in mid-2021. The federal minimum wage remains at $7.25, but the Fight for $15 movement has led many workers to expect at least $15 an hour.

The average hourly earnings of all non-supervisory workers were $26 an hour in mid-2021.

The US had 11 million job openings and almost nine million unemployed workers in August 2021. Many employers blamed federal pandemic unemployment insurance benefits for their difficulties finding workers to hire, while some analysts pointed to closed or uncertain in-person schools and child care centers that keep mothers out of wage work for the reluctance of jobless workers to accept jobs.

On September 6, 2021, extended federal Unemployment Insurance benefits beyond the usual 26 weeks of state UI benefits for 3.3 million people ended, as did special UI benefits for 4.2 million gig workers and the self-employed and the $300 a week federal supplemental UI benefit for three million workers who receive state UI benefits. There was not an immediate rush of workers into jobs, and recruiting and retaining employees remained the top challenge of restaurant operators.

Some surveys suggest that workers who were laid off from low-wage jobs are expecting higher wages to return to their old jobs during the “great reassessment” of low-wage work. Up to half of the workers who were laid off from jobs in hotels, restaurants or bars say that they are seeking jobs in sectors that offer steadier work, better hours and more career prospects.

Pre-Covid, many employers required college degrees as a way to screen workers for jobs that offered career prospects. Two-thirds of US workers, and 80 percent of Hispanic workers, do not have college degrees, making low-skilled workers a cost that many employers want to reduce rather than an asset that firms are willing to invest in for the mutual benefit of the company and the worker.

Covid. President Biden in September 2021 ordered the Occupational Safety and Health Administration (OSHA) to develop a temporary emergency standard that requires employers with 100 or more workers to mandate that their employees be vaccinated. The 100-employee vaccine mandate is expected to cover two-thirds of US employees; 20,000 US firms have over 500 employees.

Covid accelerated changes that were already underway in the world of work, from working remotely to substituting capital for labor where possible. Many highly educated professionals are expected to combine in-person work for two or three days a week with remote work during the other days.

A major benefit of remote work is no commute. Commutes averaged 55 minutes a day in 2019, so not commuting provides extra time that is equivalent to a 10 to 15 percent raise. The question is whether employers will expect an additional hour of work in exchange for saving an hour of commuting time, and how they will enforce any requirements for more work hours.

Future work patterns for low-skilled workers who work in person are less clear. Some observers believe that some low-skilled workers could be worse off, including workers in warehouses who wear devices that track them constantly and independent contractors who rely on apps to find customers for rides and deliveries.

Constantly monitored employees in Amazon warehouses, for example, may receive at least $15 an hour and benefits, but lose their autonomy, since they must satisfy a productivity standard that reflects the average productivity of all workers in a particular warehouse. Amazon warehouse workers, who often work 10-hour shifts with a 30-minute lunch break and two 15-minute rest breaks, know both the warehouse productivity standard and their own productivity.

Governor Newsom signed AB 701 in September 2021, which requires Amazon and other warehouse operators to disclose their productivity standards to the state’s labor commissioner; employees may sue employers who set excessive productivity standards. Amazon said the bill is not needed, since fewer than one percent of warehouse terminations are for subpar work performance.

Some employers who raised wages for entry-level workers faced complaints from their higher-wage employees due to wage compression, the flattening of wage hierarchies. Chipotle Mexican Grill, which owns most of its 2,900 US outlets, raised entry-level wages to $15 an hour and also raised wages for higher-paid employees to avoid wage compression. Some firms that raised only entry-level wages received push back from higher-wage employees.

Many service jobs may be eliminated by automation or changing consumer preferences, including checking into hotels by app and cleaning hotel rooms only by guest request. Unite Here estimated that 180,000 jobs could be lost if hotel rooms are cleaned by request rather than daily, and that more time will be required to clean each room after several days without daily cleanings.

Education. Covid may change the education system. Two-thirds of public schools were open for full-time and in-person education in May 2021, while two percent were fully remote. Mandatory in-person schooling spread early in the 20th century over the objection of many farmer parents because educators argued that productivity growth and individual earnings depend on the knowledge and social skills acquired in schools.

A combination of teacher and parent pressure may preserve the option of remote learning for K-12 students despite studies showing that pupils learn less in remote settings. Some school districts mandated in-person attendance beginning in fall 2021, but almost all offered remote learning for parents who want that option for their children. Low-income Black and Latino parents were more likely to resist a return to in-person schooling, which could further increase income inequality.

There are five million international students in the OECD countries, including a million in the US, and smaller numbers in Great Britain, France, and Australia.

H-1B. The H-1B program created in 1990 allows US employers to request 65,000 visas a year for foreigners with at least a college degree who are employed in US jobs that require such degrees. Amendments added 20,000 visas a year for foreigners with master’s or higher degrees from US universities, and provide an unlimited number of H-1B visas for nonprofits.

When enacted, legislators expected the program to quickly reach the 65,000 limit and then decline as more US students acquired IT degrees. Instead, the program expanded slowly, with requests for H-1B visas rising sharply after the emergence of Indian-based outsourcers who take over the IT work of a US firm, using H-1B and US workers in the US and Indian workers in India. Some US firms laid off their US IT workers because the Indian outsourcers can meet their needs cheaper.

H-1B workers must be paid at least the prevailing wage for the occupation in question and the actual wage paid to US workers in similar occupations. Indian outsourcer HCL, in documents filed in a case alleging violations of the False Claims Act, reported paying H-1B workers in the US less than the wages that it paid to its US workers, a violation of H-1B regulations.

UCB economist David Card, best known for showing that the influx of Cubans into Miami in 1980 did not adversely affect Miami-area Black workers and finding that raising the minimum wage in New Jersey did not reduce employment in fast-food restaurants as compared to Pennsylvania, was one of the three recipients of the 2021 Nobel Prize in economics, which cited the ability of economists to use natural experiments to draw causal inferences. Co-winners Joshua Angrist and Guido Imbens pioneered methods to estimate the effects of an additional year of schooling, concluding that the extra year adds 10 percent to a person’s lifetime earnings.

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