This week Governor Stitt and the Oklahoma Legislature decided to end participation in a handful of federal pandemic aid programs, namely the $300 per week Federal Pandemic Unemployment Compensation (FPUC), the Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA), and the Mixed Earner Unemployment Compensation (MEUC). These federal benefits will expire on June 27th, giving recipients approximately six weeks to find a new job. In addition, the governor signed an executive order offering a special one-time $1200 incentive to the first 20,000 workers to rejoin the workforce.
Perhaps unsurprisingly, this has turned into a partisan issue. Governors and legislatures in many GOP-led states have opted out of the federal assistance programs or signaled their intention to do so. Those on the other side of the aisle decry such actions as a dangerous attempt to take aid away from people in their most vulnerable state, leaving them without a job or the enhanced unemployment benefits. One article in the Oklahoman lists a few reasons why they believe opting out of these benefits is dangerous (quoting from the article):
- Some jobless workers don’t have the same access to childcare as they did before the pandemic, what with many school districts still being closed, to some degree, for in-person learning. So childcare costs could exceed wages for lower earners, even with full-time jobs.
- Some unemployed workers have yet to get vaccinated, or have vulnerable dependents at home who are not eligible for a vaccine, and returning to work could compromise their safety.
- Some industries have yet to restore jobs, and while there may be shortages in certain fields, that’s not universal.
However, these claims are not particularly compelling when considering the following: first and foremost, our schools have been open for in-person learning for the majority of the spring semester. Second, the vaccine rollout in Oklahoma has been quick and efficient, the vaccine is now widely available to anyone who wishes to get it, and Covid rates in our state are at their lowest since early June of last year.
The New York Times recently weighed in on the labor shortage issue, listing claims from McDonalds, Uber, Dominos, and others, before calling the whole idea a myth. According to the Times, the problem isn’t that there is a labor shortage; the problem is that employers simply aren’t paying enough to incentivize people to come to work, thus creating the illusion of a labor shortage. In essence, greedy corporate executives are so used to making ridiculously high profit margins in a low-wage economy that they can’t fathom paying more and cutting into their profits. Their solution: raise wages.
While there may be some truth to the Times’ claims, a different explanation makes more economic sense. Government intervention via price control and enhanced unemployment benefits has artificially created these shortages. For example, I recently flew into the Las Vegas airport on my way to Utah. I had to take an Uber from the airport to the place I was staying that night. However, when I opened the app and requested a ride, it said there were no drivers in my area. I assumed it was a glitch and closed and re-opened the app. Same result. After multiple failed attempts to locate a ride, I finally tried UberXL (an option that provides larger/nicer rides for a much higher price) and was immediately linked to a driver. Once he arrived, I told him about my experience. He was not surprised in the slightest. He informed me that the governor issued an executive order prohibiting ride-sharing services like Uber from charging surge prices.
In addition, the unemployment insurance and benefits were creating a perverse incentive not to work. As a result of these policies, some UberX (the basic/economy option) drivers simply quit driving because it wasn’t worth it. Others set their status as Comfort (a higher priced option) or XL. The result: UberX drivers are so scarce it is nearly impossible to get a ride. Those needing a ride must choose a more expensive option such as Comfort or XL, sometimes 2-3 times more expensive.
Here in Oklahoma, there are record numbers for job openings and plenty of unemployed Oklahomans. And yet, businesses are struggling to fill their openings. The issues we have in this state do not have very much to do with greedy executives paying low wages, and can more likely be attributed to government policies which distort markets and create perverse incentives to stay home instead of work. The governor and the legislature are right on this one, the federal benefits should end and Oklahomans should get back to work.
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.