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April 21, 2022

A Permanent Labor Shortage?

More than two years after the pandemic began, we’re still 1.2 million workers short of where we were.

The Biden administration and its lapdogs in the media continue to push fantasies about our “transitory” economic troubles, but those of us who live in the real world know better. Inflation is at its highest level in 40 years, and companies are still struggling to fill positions. A new study sheds light on those struggles, revealing that millions of able-bodied workers have no intention of returning to the workforce anytime soon, if ever.

It’s called long social distancing, and it’s another gift of the COVID pandemic. The study, conducted by economists from Stanford University, the University of Chicago, and Instituto Tecnológico Autónomo de México, found that more than 10% of Americans who worked in 2019 plan to continue long social distancing after the pandemic ends. This includes not returning to work, and it translates to a sustained loss of 3.5 million workers. The economists arrived at this figure by calculating the number of people working in March versus anticipated labor force growth based on the years 2015-19.

The labor force rebounded quicker than expected after the dark months of March and April 2020, when 22 million people lost their jobs. Still, there are currently 1.2 million fewer workers now than before the pandemic. However, if the study’s assessment is correct, then the jobs recovery is just about at peak. This means that the labor force could remain depressed for years to come, and that could make a full recovery to pre-pandemic levels all but impossible.

It’s generally not fear of getting sick that’s keeping many of these people from returning to work, though. Only 24% of those surveyed said that infection was a primary or secondary reason for not seeking work. Many, in fact, are still living off savings and the gobs of money given out by the government in the form of stimulus payments, enhanced extended unemployment, and child credit payments. Clearly, some folks are less inclined to work so long as the government pays them to stay home.

Labor force participation may well recover if businesses begin to offer more remote work options. But remote work tends to be more common in information services and digital industries. These are good-paying jobs, but they often require a college degree. And the current workforce dropouts who are the focus of the study tend to be women, have no college degree, and work in low-paying fields. These people are less likely to find worthwhile options for remote work.

In the post-COVID world, remote work is becoming more prevalent, but it isn’t the prime mover of the economy. Manufacturing, and a lot of it, tends to be the backbone of a robust economy — and manufacturing jobs don’t lend themselves to sweatpants and home offices.

We’re likely to feel the effects of this labor shortfall for some time in the form of continued inflation and shortages. The economy will adjust, but it’s hard to say what things will look like on the other side. Regardless, the states and the federal government must stop printing money, cutting checks, disincentivizing the workforce, and locking down American businesses.

It has historically been the case that the economy is healthiest when government gets out of its way. Why should the present case be any different?

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