The fall was intended to mark the beginning of the end of the labor shortage that has held back the country’s economic recovery. The comprehensive unemployment benefits ended. Schools reopened, releasing many caregivers. Certainly, economists and entrepreneurs reasoned, a flood of workers would follow.
Instead, the labor force shrank in September. There were five million fewer people in work than before the pandemic, and three million fewer were looking for work.
The slow return of workers is causing a headache for the Biden administration, which was counting on a strong economic rebound to boost its political agenda. Forecasters have been largely taken aback by the problem and don’t know how long it will last.
Conservatives have blamed the generous unemployment benefits on keeping people at home, but evidence from states ending payments early suggests the impact was small. Progressives say companies could find workers if they offered higher wages, but the labor shortages are not limited to low-wage industries.
Instead, economists point to a complex, overlapping web of factors, many of which are slow to reverse.
The health crisis still makes it difficult or dangerous for some people to work, while the savings accumulated during the pandemic have made it easier for others to turn down jobs they don’t want. Psychology may also play a role: Surveys suggest the pandemic has prompted many people to rethink their priorities. And the abundance of open positions may motivate some to wait for better offers.
The net result is that, probably for the first time in decades, workers are leveraged up and down the income ladder. And they’re using it to demand not only higher wages, but flexible hours, more generous benefits, and better working conditions. A record 4.3 million people quit their jobs in August, in some cases halfway through shifts to take up better-paid jobs on the streets.
“It’s like the whole country is in some sort of union negotiation,” said Betsey Stevenson, a University of Michigan economist who was an adviser to President Barack Obama. “I don’t know who is going to win in these negotiations that are going on right now, but right now it seems that workers have the upper hand.”