by: Andrew Fitzgerald, senior director of business intelligence
As the state and local governments ended practically all pandemic-related masking and capacity restrictions over the last few months, the federal enhancement to unemployment has remained. This guaranteed that unemployed residents earned $547 weekly, as opposed to the typical weekly Louisiana unemployment benefit of $247. As BRAC has previously stated, this enhancement disincentivized the region’s 24,000 unemployed residents from returning to one of the 33,000+ open jobs in the metro area. However, the legislature passed a bipartisan bill on the last day of session that tied a modest increase in weekly unemployment benefits to cessation of the federal enhancement by July 31 – with a signature, the governor could now help right-size the state’s workforce about a month earlier than originally planned.
This move is needed because data has shown that despite a massive number of job openings, unemployed residents have had little motivation to return to work. To a certain extent, it’s an issue of skills mismatch. There are several thousand high-wage jobs in truck driving and nursing, but of the 24,000-plus residents on unemployment, it’s unlikely a high percentage of those have CDLs or nursing licenses. But there are still tens of thousands of regional jobs that require only a high school degree and no relevant work experience, so skills mismatch isn’t the only culprit. A number of organizations have tried to blame resistance to returning to work on factors outside of enhanced unemployment, but they’re based in neither data nor reality. It’s crucial that the governor recognize that the enhanced checks are the root cause of our persistently high unemployment rate, not the talking points being peddled by anti-business groups.
The thrust of these talking points is that a combination of three things outside of the enhancement are to blame: low wages for the jobs available, a lack of childcare options, and lingering fear over COVID – but relevant data shows that these theories don’t hold water. In terms of pay, the median advertised wage for open jobs in the Baton Rouge metro area is $22.00 per hour. That means half of all available jobs offer more than that in compensation, which is already significantly higher than the median individual wage in the region and state. In terms of childcare, working parents in the region may actually be better positioned now than they were before the pandemic – data from the state Department of Education shows that there are two more childcare centers in operation now than in February 2020, which equates to increased capacity of 514 more seats. As for the idea that residents are still concerned about COVID, vaccines have been available to all adults for more than two months, with more than 50 sites actively administering doses within five miles of the core of the metro area. The relatively low uptake for the region compared to national rates of inoculation make it clear that the pandemic is no longer a concern to a meaningful part of the regional population.
So what’s left to blame for the unwillingness to return to work? The enhanced unemployment benefit from the federal government. Federal enhancement was necessary and good when the government mandated the shutdown of the economy, making it impossible for many to earn a living and pay bills. But with all restrictions lifted, that’s no longer the case. In fact, we have many more open jobs than unemployed residents at this point. The enhancement has now distorted the labor market, and gives residents a perverse incentive to avoid returning to work until the enhancement expires in September. As the chart below illustrates, in the current environment, as the demand for more employees continues to rise, the number of people on unemployment remains consistently high.
The good news is that Louisiana is at the precipice of the solution, which half of all states have already adopted – declining the federal enhancement, since the rationale behind it no longer exists. Every state in the Southeast outside of Louisiana has set a date in June or July for the enhancement to sunset, including high-tourism states like Florida, Georgia, and Texas. Enabling businesses to compete with other businesses for talent rather than an enhanced entitlement program with no work requirement is the next big step in right-sizing the regional and state economies. With the stroke of a pen, the governor can make that happen, and BRAC urges him to do so.
As Senior Vice President of Business Intelligence, Andrew focuses on research and analysis for BRAC’s business development and economic competitiveness teams, providing economic, demographic, and fiscal research to support business expansion and relocation efforts in the Baton Rouge Area and analysis of education, workforce, tax, and other economic and public policy issues.