The COVID-19 pandemic is a public health crisis the world hasn’t faced since the 1918 Spanish flu. Worldwide, 3.75 million people have died, including more than 600,000 Americans.
Extraordinary measures were taken as a result. Mask mandates and social distancing recommendations. Restrictions placed on “nonessential businesses” shut down a large portion of the economy.
So, the health crisis led to an economic crisis. The U.S. unemployment rate jumped from 3.5% in February of 2020 to 14.8% in April of 2020. U.S. GDP fell by an extraordinary 31.4% in the second quarter of 2020.
To help struggling Americans, the federal government enacted several stimulus measures, including a $300 a week boost in unemployment benefits.
It’s clear that the extraordinary measures taken to fight COVID-19 were necessary, but those measures are supposed to be temporary. We certainly couldn’t shut the economy down indefinitely, and the government can’t pay out stimulus and enhanced unemployment benefits for an excessive period of time without unintended consequences.
The COVID-19 vaccines are providing a path out of the pandemic. Vaccine hesitancy remains a problem, about half of Wisconsinites have received at least one dose and the result has been a dramatic decrease in COVID-19 cases in the state.
That has enabled most COVID-related restrictions to be dropped on businesses and individuals. As a result, the economy is showing signs of significant improvement. The U.S. unemployment rate was down to 5.8% in May. Wisconsin’s unemployment rate was down to 3.9% in April. The state’s labor force participation rate was 65.9%, much higher than the national rate of 61.7%.
That data shows the economy has improved enough that the extra unemployment benefit is no longer needed.
In addition, numerous businesses have reported difficulty finding workers to fill open positions and many are blaming the $300 in additional unemployment benefits. Several states have dropped the benefit, but Wisconsin Gov. Tony Evers wants to keep it in place and says he has seen no “proof” the additional unemployment benefit is providing a disincentive for people to work. That position defies common sense and makes Evers appear out of touch with the state’s businesses.
The labor shortage problem is indeed more complicated and won’t simply be solved by eliminating the $300 weekly unemployment benefit. Even before the pandemic the state had a major problem with brain drain and a labor shortage. Retiring baby boomers and a lack of population growth are longstanding issues. Wisconsin needs to do a better job of attracting talent and blue-collar workers.
Some argue employers simply need to pay more to fill open positions. In some cases, that’s true. But for businesses that are operating on narrow profit margins, it’s not realistic.
Wages are best determined by supply and demand, and the lack of labor means employers will indeed need to increase wages. But businesses shouldn’t have to compete with enhanced unemployment benefits that were supposed to be temporary and are no longer
necessary.
