A lot depends on fixing this problem: The U.S. economy won’t fully recover from the pandemic until more Americans get back to work.
That’s why POLITICO convened a virtual “policy hackathon” with 10 top labor and workforce leaders from government, nonprofits and academia. During an hour-long Zoom conversation moderated by chief economics correspondent Ben White and New Jersey bureau chief Katherine Landergan, we asked them to compare notes, identify emerging challenges and share the best ideas for creating new jobs and getting more workers back to earning a paycheck.
Our policy hackers, from regions and states as diverse as Tennessee, Indiana, Arizona and New Jersey, discussed the pandemic-triggered shocks to the labor market and proposed eight potential policy solutions.
Here are key takeaways from that conversation.
Part One: Why so many Americans are still out of work
In many ways, life in America seems to be returning to something close to normal. Many stores and restaurants have reopened to customers. Offices are making plans for bringing back employees who have been working remotely. Schools and universities are revamping classrooms in anticipation of going back fully to in-person learning in the fall.
But this is still a nation, and an economy, in recovery. Many businesses — particularly in the retail and hospitality sectors — didn’t survive the pandemic’s economic shock and have shut for good. Other businesses survived by using technology to replace some staff, and those systems are likely to stay in place going forward. And many workers’ lives have been disrupted in ways that may make it hard to return to work, either because they still lack childcare, they’ve relocated to a new area or they are struggling with illness and loss.
Here are some of the challenges that our policy hackers identified.
Covid-19 is still a threat.
The economic crisis was first and foremost a health crisis: the virus made it more dangerous for workers to go to work, and with people staying home, many businesses lost customers and revenue.
“That put us in a deep hole,” said Aaron Sojourner, a labor economist at the University of Minnesota and former member of the White House Council of Economic Advisers. “It was a real public health crisis that drove us down.”
For many workers, fear of infection remains a concern. Many workplaces are not requiring masking or vaccination, which workers are taking into account. With vaccination rates still below optimal levels, particularly in some parts of the country, some workers will remain reluctant to return to work until the public health crisis is truly past.
“For each of us, the way that we think about our own health, and the way we want to interact with other people and how often we want to be in the office, and whether we do or don’t want to be wearing masks around people who are unvaccinated, those elements of our preferences are important for our job match,” said Marianne Wanamaker, an economics professor at the University of Tennessee and former member of the White House Council of Economic Advisers.
Job losses were uneven and concentrated in lower-wage sectors.
The pandemic took the hardest toll on service jobs, particularly in the leisure and hospitality sectors. According to data from payroll processing firm ADP, those sectors employed 11 percent of American workers before the pandemic, and experienced more than 40 percent of the job losses.
Nela Richardson, chief economist at ADP, said that by comparison, white-collar sectors or financial services “hardly even felt a speed bump.” This has led to an uneven recovery, where Americans with low-income are still looking for work while wealthier Americans have been able to work from home and keep their jobs.
“You really have not only a lopsided, uneven recovery, but really two different job markets — one for low-paid workers who are still seeing barriers and ongoing health concerns, and another one where the competition and salary increases are probably going to accelerate,” Richardson said.
Workers’ needs have changed.
There’s a part of the work equation that caught many by surprise: convincing unemployed workers to take the jobs that are available.
Hackers noted that the disruption caused by the pandemic forced many employees to reevaluate their personal and professional lives, and as a result, what employees are seeking in a job now may be very different from what they sought pre-pandemic.
“Fundamentally, what we’re seeing right now is a total rethink of work,” said Anne Caprara, chief of staff to Illinois Gov. J.B. Pritzker.
In particular, many now want the flexibility to work from home, at least part of the time, to make it easier to meet family needs and save time and money on commuting.
“Employer-employee relationships that might have been great in late 2019 are now no longer feasible because employers and employees don’t line up,” said Wanamaker. “That is generating, in the labor market, a lot of churn.”
Many workers still don’t have childcare in place.
When the pandemic struck, many workers — particularly women — found their childcare arrangements upended. For some, day cares shut. For others, nannies or trusted family or friends got sick or moved away.
That’s leaving many parents without a way to return to the workforce.
“Parents had to deal with kids learning remotely, not being able to go to school, infants not being able to find day care and childcare,” said Caprara. “We see both the supply and demand issues.”
Richardson noted that in September, the month most schools reopen after summer vacation, women left the job market last year at four times the rate of men, presumably because they needed to look after children and didn’t have other childcare options.
But this isn’t a new phenomenon, just one that’s been exacerbated by the coronavirus. Every summer, labor force participation by women falls because of a lack of affordable childcare, Richardson noted; availability of childcare is directly related to the availability of women workers.
Workers wage expectations are higher.
Even before the pandemic, there had been a movement to boost the minimum wage, which in most areas hasn’t changed for decades. During the pandemic, many employers and localities found they had to boost the pay of low-wage “essential” workers to keep them on the job, and those increases wound up raising the effective minimum wage.
The result is that to attract new employers, employers must rethink whether they need to improve the wages and benefits they are offering.
“A lot of people who used to pay minimum wage or $10 an hour think $15 an hour is very competitive, until you tell them that that’s what McDonald’s pays, that’s what Amazon pay is,” said Sarah Blusiewicz, assistant director of the Rhode Island Department of Labor and Training. “That’s what the new default minimum wage has become.”
Automation has eliminated some jobs.
In the service sectors that lost the most jobs, employers filled some of the gaps with artificial intelligence tools or other equipment. Restaurants, for instance, started using apps to take meal orders and some agricultural and food-processing plants replaced field hands and meatpackers with robots. As a result, those sectors and others will not be employing the same number of workers going forward, even if demand climbs back to pre-pandemic levels.
“Many of the jobs that were lost during the pandemic have been automated out and are never coming back,” said Michael Wisehart, director of the Arizona Department of Economic Security. “And so there are a number of individuals that may have [worked] in an industry for many many years that they’re unfortunately not going to be able to [go back to their old jobs].”
There are still unknown factors.
Coming up with policy fixes will be hard because there are still unknown factors at play, several hackers noted. One major and still unresolved question is whether unemployed Americans receiving enhanced unemployment benefits have been disincentivized to return to work, particularly to lower-wage jobs.
Rubeela Farooqi, chief economist at High Frequency Economics, said that another factor was a sharp rise in the number of retirees during the pandemic, which has also created openings that affect the demand for new workers.
“I’m not convinced that this is a labor shortage as much as other issues that are playing out here,” Farooqi said. “It’s going to take some time before we get a clearer picture. And also we have to consider the permanent damage and scarring to the labor market.”
Part Two: How to create more jobs and find workers to fill them.
There’s still a deficit in the number of jobs available, and the solutions to that problem are more long term, including spurring economic demand.
In the meantime, the more complex and short-term problem is finding a way to help match workers to the jobs that are available, and address the challenges that keep them from restarting work.
Here are eight ideas our policy hackers came up with for helping get unemployed workers back on the job.
1. Increase vaccination.
The first order of business should be to further educate people who are not vaccinated, to get vaccinated, the hackers said. In all, just more than half of working-age Americans are fully vaccinated, which means the virus is still out there and the labor market won’t fully recover until that threat has diminished.
“Addressing the public health crisis is the first-order solution to getting us out of the jobs crisis,” said Sojourner of the University of Minnesota. “There’s still a lot of work to do in terms of public health and persuasion.”
2. Outline career pathways.
A lot of the jobs that are unfilled are lower-wage jobs, and many workers who lost those jobs are looking to trade up, particularly after seeing so many employers raise wages during the pandemic.
New Jersey Labor Commissioner Robert Asaro-Angelo said that to bring minimum-wage workers back, employers need to “make sure those workers have a career pathway going forward.”
“You will have better luck filling those jobs if you can show them … your next step is this and your third step is that,” Asaro-Angelo said. “It sounds simple and basic, but so many employers aren’t able to provide that.”
3. Provide transitional financial assistance.
Unemployment benefits were generous during the pandemic, and — particularly for low-wage workers — may have been higher than their pre-pandemic wages.
As a result, some states are experimenting with providing financial incentives to help wean some of the unemployed off those benefits and return to work. In Rhode Island, for example, a new law allows people to collect up to 150 percent of their unemployment benefit rate before they lose their benefits. Rhode Islanders can also continue to collect the extra $300 a month in federal pandemic support as long as they are still eligible for unemployment.
“If you’re [trying to decide] between do I stay home on unemployment or do I go back into the labor force, this is just to help you make that decision a little bit easier,” said Blusiewicz of Rhode Island.
Michael Wisehart, director of the Arizona Department of Economic Security, says his state is providing a $2,000 bonus for workers who find and maintain full-time employment, and $1,000 for part-time workers. The money is designed not only to help offset the loss of unemployment benefits, but also to help a worker with the expenses involved with starting a new job, such as buying a car or new work clothing or tools.
4. Increase the supply of childcare.
One of the most significant costs that working parents incur when they return to work is paying for childcare, said Wisehart. In Arizona, he said that the state is providing three months of childcare for workers who re-enter the labor market after being on unemployment benefits. If workers find a job that pays too little to cover their childcare costs, they can apply for a subsidized childcare program through the state, he said.
That assistance boosts the demand for childcare, which hopefully will also increase the supply by spurring more childcare providers to reopen.
“There’s a tremendous amount of investment in Arizona in the supply side of childcare,” he said, “trying to prop that industry back up, get it turning again, so that individuals who are reentering the workforce have a safe and nurturing place to take their children as they go back to work.”
5. Expand work-from-home options.
Many employees have found the flexibility to work from home, at least part of the time, has been beneficial to themselves and their families. Going forward, that’s an option that many want to retain.
As a result, companies need to be thinking about how they are structuring their work-from-home policies, Richardson said. The more flexibility that’s given, the more this will level the playing field for women who are caring for kids. Companies need to ensure that remote workers aren’t penalized for taking that option, such as losing promotions or being given less desirable assignments.
“We have to make sure that corporate America realizes that there’s inequities in their own practices that need to be addressed,” she said.
6. Provide workers with technical skills and job training.
Many of the jobs that were lost during the pandemic were low-skill service jobs that have been automated and are never coming back. For these workers, learning a new profession or trade is key to finding a new career.
Illinois, a state that has a long and proud tradition of manufacturing, shed hundreds of thousands of those jobs during the pandemic, said Caprara of Illinois. Federal pandemic aid has been a “boon” for states like Illinois, and will allow the state to invest more in job retraining for those workers, she said.
Rhode Island also used $45 million of federal coronavirus relief money to pay for job placement and job training services to help unemployed residents get back to work. At the same time, the state also is trying to offer more services online, including a virtual career center.
“We want to make sure that every worker has [technology] access, because if you can’t actually apply for that job, …or you can’t make that virtual interview, then you’re cut out of that labor market altogether,” Blusiewicz said.
Arizona is also taking the formal education route, and providing scholarships for residents who need to be retrained to go to community college or to get new credentials, Wisehart said.
“We also hear from states that they want to use their post-secondary — their community college — systems more effectively,” said Andy Van Kleunen, CEO of the National Skills Coalition. “It would be better if the federal dollars like Pell Grants could be more flexible to put people in to shorter-term programs that connect to a job, that can move folks right away into a job, so that they don’t have to sit in a classroom for 16 weeks in order to qualify for Pell Grant.”
7. Expand apprenticeships.
Some workers can’t take years off to return to school and some trades are best learned on the job. For workers whose jobs disappeared during the pandemic, learning a new trade while earning money may be the best option, several participants said.
New Jersey has had great success with its apprenticeship programs, said Asaro-Angelo, and workers who were trained in specific fields had a much easier time finding new jobs or even collecting unemployment, because their work history was easier to determine.
“There’s no doubt we’re going to be doubling down on [apprenticeships] post-pandemic,” Asaro-Angelo said, adding that the state would like to have “a bigger focus on trying to help employers have that bandwidth to provide the services and training going forward.”
8. Provide transportation assistance.
Obviously, not everyone can do their jobs virtually. And for low-income workers, just getting to work can be a significant barrier to returning to work.
Santiago Garces, executive director of Community Investment for South Bend, Ind., said that to address this problem, his city created a program that gives shift workers discounted rides either through transit or ride-sharing.
“Obviously, during the pandemic, carpooling was not a feasible option, but we are starting to see that some of these people need that kind of support coming back to the workforce,” Garces said.
CONCLUSION: What can Washington do?
While most of the discussion focused on state-level policy, POLITICO’s policy hackers also identified several ways that Washington can do more to improve the post-pandemic jobs market.
One relatively inexpensive thing would be to improve data collection and sharing. Several of the hackers said that throughout the pandemic, states lacked the information they needed to make the smartest policy choices in real time. As a result, they said that the federal government should overhaul how it collects and shares data about jobs and unemployment.
“The last year and a half has proven to us that our federal data infrastructure is too slow and too cumbersome and doesn’t ask the right questions,” said Wanamaker. “We just have this incredibly archaic system, and somebody just needs to stand in and blow it up.”
The weekly Department of Labor report, Sojourner said, is the closest to a real-time report the nation has, and it’s only very basic information, like how many initial unemployment claims were filed, and how many continuing claims. There’s no information there about race and ethnicity, or wage levels, so state officials don’t know enough about which workers and which industries are struggling.
The lack of information was so sparse that he found himself collecting news reports and coding the information to create his own dataset.
“When things are changing quickly you realize, we realized, holy cow, we have no idea what’s happening,” Sojourner said. “And the Congress is making huge decisions right now about spending trillions of dollars, and they’re doing it in ignorance, they’re doing it based on very noisy signals.”
But even though states only have to report a limited amount of information to the federal government, they have a lot more information at their fingertips, like an unemployed worker’s age, race, income and industry. Some states made this information voluntarily available during the pandemic, but Wanamaker said the federal government could make more use of the state data.
Data points that would be helpful for policymakers going forward include: the most recent wage reported by an employer for each worker who is on unemployment, industry patterns, age patterns and education status. That kind of data would make policy responses more nimble at both the state and federal levels.
Another area where Washington could help — but where politics is complex — is immigration. Several policy hackers noted that the country’s labor market has just been completely reconfigured, so longer-term, the federal government needs to rethink which categories of workers are prioritized for immigration visas to match up with the economy’s needs.
“We have designed immigration structures in this country that are incredibly narrow and inflexible, and they give access to immigration lanes for particular employers in particular industries to particular skill sets,” Wanamaker said. “We just had a total overhaul of the way our economy functions, and who is available for work, and we still have the same immigration structure we had when we started this and that doesn’t make any sense.”
Finally, the federal government could be smarter about how it uses federal funds to promote reemployment. Of the $5 trillion that Washington has spent so far as part of the rescue and relief efforts, less than $350 million has gone towards reemployment, said Van Kleunen. What’s more, he said, the infrastructure package that’s currently being considered in Congress has no investment in job training.
“Washington has to catch up to the states and start investing in people, and investing in the kind of reemployment strategies that these folks have established on the ground,” he said.