A version of this article was originally published by the Foundation for Economic Education.
Something is rotten in America’s labor market. As 6.9 million jobs remained vacant last month and a record 40% of small businesses are struggling to find employees, 18.3 million Americans were receiving unemployment benefits, which means millions of unemployed Americans are deciding to stay home. The reason is simple: turbocharged unemployment benefits via the Trump-Biden stimuli, now extended through September 4, 2021, pay ⅔ of workers more money — typically 33% more — than their previous jobs did, creating a strong reason for people to not to go back to work at all. At the same time that our nation is struggling to fund record budget deficits, our nation’s “leaders” have decided to incentivize millions of Americans to stay off tax-paying payrolls and remain on tax-funded welfare. To make matters worse, progressive senators are already demanding another round of counterproductive stimulus that will further benefit major corporations and organized interests at the expense of the small businesses and everyday Americans who will end up footing the bill.
In states like California, where unemployment stands at 9% as of February 2021 and unemployed individuals were able to receive $4200 per month in benefits, it’s no surprise that restaurants and other small businesses are struggling to hire. The state’s unemployment benefits — a maximum of $1050 per week at the beginning of the pandemic and $750 per week now — pay far better than the state’s $13 minimum wage ($520 per 40 hour workweek). Workers staying at home aren’t stupid. Why work for $13 per hour in California when unemployment benefits now “pay” $18.75 per hour (assuming $750 per week in unemployment and a 40 hour workweek)? Why bother fighting to raise the minimum wage when ‘roided up unemployment benefits have already raised the labor floor?
Thus, when San Diego motel owner Elvin Lai secured a bridge loan to keep his business alive and bring furloughed employees back to work, many declined, saying, “Why do I need to take the risk if I can make more sitting at home?”
It’s in this labor environment — with 48% of small businesses at risk of going out of shutting down forever and thus often unable to afford to pay higher wages — that America’s largest companies, like Amazon, Best Buy, and Target, have raised their national minimum wages to $15 per hour, more than double the local minimum in some states, to dominate local competition and sustain strained yet growing operations by remaining competitive with record unemployment benefits. Cheap loans and a zooming stock market have provided abundant capital for major corporations to finance higher wages and expanded benefits for employees. While the pandemic gutted small businesses, America’s big box e-commerce and retail stores thrived.
Meanwhile, small businesses, driven to the verge of collapse often through no fault of their own, have been unable to keep up. As major corporations secured bailouts and remained open for business, as “our” government picked “essential business” winners and “non-essential” losers, our small businesses have faced lockdowns and exploding expenses, further compounding our nation’s growing economic divide and undermining faith even more in our ever less merit-based society.
It’s obvious that this is neither fair nor sustainable, but the foil to this folly isn’t another round of bailouts, stimulus or enhanced unemployment, as a recent letter to the president from ten progressive U.S. senators requests. We’ve known for a while how stimulus packages do little good, amplifying the concentrated interests of the well-connected while spurring dangerous inflation that rewards risky debtors and punishes prudent savers and everyday household consumers.
The Trump-Biden stimuli have continued this perilous precedent, ballooning unemployment benefits to record levels and bailing out major corporations while leaving small businesses at a crushing disadvantage. Small businesses shouldn’t have to suffer through another round of stimulus. Instead, we need to end the lockdowns and fear mongering that our politicians have used to justify special bailouts, boosted benefits, self-serving subsidies, and the power to decide who stays open and who shuts down. To give our small businesses a fighting chance to secure the workers, customers, and capital they need, we must reject calls for more stimulus, end the boosted benefits that are keeping millions of workers at home, and fully unleash our lockdown-shackled economy. If it’s ever going to be morning in America again, we’ve all got to get back to work.
Kenneth Schrupp is editor in chief of The California Review and a Young Voices contributor writing on the intersection of business, politics, and media.