Many Workers Are No Longer Willing To Take Lousy Jobs

Republicans would like you to believe that the current "labor shortage" is because workers would rather get an unemployment check. That's ridiculous! Workers would rather work than get a government check, because there is honor and respect in working for a living. But it makes no sense to work at a job that keeps you in poverty and doesn't pay your bills. Workers are no longer willing to go back to a lousy and low-wage job.

Here's how economist Paul Krugman puts it in The New York Times: 

The emergence of what look like labor shortages even though employment is still five million below its prepandemic level, and even further below its previous trend — remains somewhat mysterious.

Unlike the “skills gap” invoked to explain persistent unemployment after the 2008 crisis, this time labor shortages seem to be real. Workers are quitting at record rates, an indication that they feel confident about finding new jobs. Wages are growing at rates normally associated with the peak of a boom. So workers are clearly feeling empowered, even though many fewer Americans are employed than in the past. Why?

Earlier this year many people insisted that enhanced unemployment benefits were reducing the incentive to accept jobs. But those extra benefits were eliminated in many states as early as June, and nationally in early September; this cutoff doesn’t seem to have had any measurable effect on employment or labor force participation. . . .

A less upbeat story says that some employees are still afraid to go back to work, and/or that many can’t go back to work because their child care arrangements are still disrupted.

But there’s at least one more possibility (these things aren’t mutually exclusive): The experience of the pandemic may have led many workers to explore opportunities they wouldn’t have looked at previously.

I’d been thinking vaguely along these lines, but Arindrajit Dube, who has been one of my go-to labor economists throughout this pandemic, recently put it very clearly. As he says, there’s considerable evidence that “workers at low-wage jobs [have] historically underestimated how bad their jobs are.” When something — like, say, a deadly pandemic — forces them out of their rut, they realize what they’ve been putting up with. And because they can learn from the experience of other workers, there may be a “quits multiplier” in which the decision of some workers to quit ends up inducing other workers to follow suit.

I like this story, in part because it dovetails with one of the main discoveries of behavioral economics — namely, that people have a strong status quo bias. That is, they tend to keep doing what they were doing even when there might be much better alternatives. Famously, workers are far more likely to enroll in retirement planswhen they have to check a box to opt out than when they have to check a box to opt in. Checking that box costs nothing, yet many people will fail to take advantage of a good deal unless enrollment is automatic.

So I can easily believe that there were many workers who should have quit their lousy jobs in, say, 2019, but didn’t because they weren’t really considering the alternatives. And it’s at least possible that the disruptions of the pandemic led to a great rethink.