High unemployment benefits and fickle government policies are stalling the recovery

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Nearly 10 million people in the United States remained unemployed despite looking for a job in the month of March. But you would hardly believe it looking at cities across the country. Here in the nation’s capital, Uber prices and wait times have exploded as supply fails to meet demand. Despite indoor dining remaining capped at 25% capacity, D.C. restaurant owners are scrambling to hire enough staff, with restaurants such as BRINE on H Street NE offering waiters $500 signing bonuses.

This problem isn’t limited just to D.C. On net, the restaurant industry has 1.2 million fewer workers today than it did at the start of the pandemic. Horror stories, from New York City to the San Francisco Bay, attest to shortages that threaten to kill the industry entirely.

Nor is the problem inexplicable, despite what might seem a puzzling persistence of double-digit unemployment in the restaurant industry. This is all the result of broken government policy, from the local to federal levels, creating perverse incentives for former workers to reject rejoining the workforce, even as millions of others remain desperate for a job.

On the federal level, the culprit is clearly expanded unemployment benefits. Back in 2020, the nonpartisan Congressional Budget Office warned that by extending the emergency increase in unemployment benefits, Congress was risking having five of every six recipients earn more on unemployment than they could from work. This, the CBO predicted, would cause overall employment to be lower in 2020 and 2021 than it would be otherwise. For some workers, it’s simply more profitable to stay on the dole — and who can blame them for making a rational choice between working for less or not working for more?

But that’s not all. On the local level, businesses have been subject to dramatic uncertainties. Los Angeles and D.C., for example, have allowed restaurants to open and then forced them to close with little notice or consistency. Many restaurant staffers would rather not gamble on whether or not they will score enough shifts to make rent. Given the capricious whims of governments gone tyrannical, unemployment benefits are a far more stable option than a job waiting tables.

Because workers collecting unemployment must usually at least go through the motions of finding work, the unemployment rate in some of these industries remains bafflingly high.

It appears that young people not normally eligible for unemployment benefits have stepped up to fill the gap, at least in part. Employment among adults aged 25 through 54 is far from recovering from the COVID crash, but the employment rate for teenagers aged 16 through 19 has nearly recovered in full.

Conservatives have long warned that excessive unemployment benefits present a perverse incentive to lower-skilled workers. Even economist Jason Furman of former President Barack Obama’s Council of Economic Advisers agrees that big government is to blame for this evident shortage.

“I think the $300 a week supplement for unemployment insurance, relaxed eligibility for unemployment insurance, and 100% federal subsidy for COBRA is going to hinder the labor market recovery at some point if it has not already,” Furman recently told the Dispatch. “More than half of workers will get more from being unemployed than they would be from being employed. Many of those workers will still choose to get jobs for the security it affords, but definitely there is a heavy thumb on the scale of staying waiting until September to take a job.”

This just means the recovery is going to take longer than expected, and the taxpayers' generosity is to blame.





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