US Economy: Part-Time Workers Struggling To Pay Expenses Despite Worker Shortage

 Part-time, front-line, and service workers in the U.S. have trouble finding enough shifts to pay for their living expenses, according to a recent study. The study shed light on the strains the economy has had along racial lines and the erratic nature of the labor shortage.

The Harvard-based Shift Project does a twice-yearly survey and found that little had improved for these workers during the pandemic.

“Unstable and unpredictable work schedules continue to be the norm for service sector workers – especially for workers of color, and for women of color in particular,” the Shift Project found.

“The persistence of schedule instability in the service sector contributes to the perpetuation of widespread racial inequality,” the organization wrote in its most recent research brief.

Service workers like cashiers are on the front lines of the pandemic and also on the low end of the US pay scale Photo: AFP / KAMIL KRZACZYNSKI

In January, the Economist Roundtable (TER) released a report that demonstrates the damage done by “schedule instability.”

Under the headline, “Hungry At The Table: White Paper On Grocery Workers At The Kroger Company,” TER surveyed 36,795 in Washington state, Colorado, and Southern California.

“Kroger’s labor force clearly recognizes that the unpredictable schedule and intense work demands make it difficult for workers to fulfill their responsibilities as family members (including as parents) and as workers,” the survey revealed.

TER reported that surveyed Kroger workers have constantly changing schedules: 50% said their schedules change every week, 13% say their schedules change every day. One out of four said their schedules changes on the same day or a day in advance, one out of three get two to five days’ notice, and only 16% reported that their schedules do not change.

According to the New York Times, when Kroger workers went on strike in January, they demanded more full-time workers a central issue to their efforts. The strike resulted in an update to contract language that led to a promise of an addition of 1,000 full-time jobs over three years.

That promise is not perfect, nor does it achieve everything that Kroger workers want and fix the instability of service industry work, but it does lead to more workers with stable schedules rather than ones that constantly change.

As the TER data shows, a more stable schedule leads to workers being able to fulfill their responsibilities more effectively, including at work and in their personal lives.

Almost two years after the pandemic upended labor markets, job openings are plentiful in many advanced economies, yet workers have not fully returned.

The broader trend of plentiful jobs and not enough workers can have major implications for growth, inequality, and inflation.

This gap, in which the employment rate is below its pre-Covid level, is playing out in the United States and the United Kingdom. Despite tight labor markets, as reflected in high vacancy-to-unemployment ratios and job quits, the employment recovery remains incomplete and below pre-pandemic levels in both countries. Now with a possible cooling effect on labor markets caused by the Omicron wave, this trend could be longer than expected.

New IMF staff research uses granular data on employment and vacancies in the US and the UK to assess four commonly held explanations:

• The effect of generous income support on willingness to seek and take up jobs
• A mismatch between the types of jobs that are available and the willingness of people to fill them
• Mothers of young children exiting the workforce amid continued disruptions to school and childcare
• Older workers withdrawing from the labor force

We found that lower participation among older workers not returning to work is the common thread, and matters most. Mismatch plays a secondary role. The fall in female participation is unique to the US, but also quantitatively important.

If the broader trend continues, it can have major implications for growth, inequality, and inflation. A continued sluggish employment recovery could constrain economic growth while fueling wage increases. While higher wages would be good news for workers, they could further fuel inflation.

The generosity of income support programs

The first possible explanation is that income support programs during the pandemic allowed workers to be picky, slowing job applications, acceptances, and, ultimately, the employment recovery.

However, preliminary evidence reviewed in our paper, including from the recent phasing out of the US federal unemployment insurance supplement, suggests the early removal of Covid-related unemployment benefits had only a modest and temporary effect on getting people back to work.

Mismatch

A second explanation is an increase in the mismatch between the industries and occupations in which the jobless are searching and those with abundant vacancies. Jobs that require in-person interactions, such as in restaurants, hotels, and entertainment, have been hit exceptionally hard, while "teleworkable" jobs fared substantially better. Others, like delivery services, even boomed. Could it be that workers who lost jobs in hard-hit industries and occupations struggled to transition into new opportunities, leading to mismatch?

The short answer is yes, but this is just one part of the story. We find that the employment loss due to mismatch during the crisis has been modest and, to our surprise, smaller than during the Global Financial Crisis. We estimate that, as of early last fall, mismatch explains only about 18% and 11% of the outstanding employment gap versus pre-Covid levels in the US and the UK, respectively.

The She-cession

A third explanation seems more potent, at least in the US. The prolonged school closures and scarcity of childcare services put an extra burden on mothers of young children, pushing many to leave the labor force — the so-called "She-cession."

We estimate that the excess employment contraction for mothers of children younger than 5 years old compared with other women accounted for around 16% of the total US employment gap with respect to pre-Covid levels as of October 2021. That was down from 23% in early September, thanks partly to the return to in-person schooling later that month. Meanwhile, there was no such She-cession in the UK, where employment fell less for females than for males. A potential explanation is that in the UK nurseries remained open throughout the pandemic, easing the tradeoff between work and childcare for mothers of young children.

Withdrawal of older workers

The final and potentially largest contributor to a lag in employment recovery is an exodus of older workers from the labor force in both countries. For some, this may reflect health concerns related to the pandemic. Others may have reconsidered their need to work as housing and financial asset prices grew substantially.

As of September, the rise in inactivity among workers age 55 and up accounted for around 35% of the outstanding employment gap versus pre-pandemic levels in both economies. It's unclear how many of those who retired or quit may eventually return to the labor force.

Beware of scarring

Taken together, mismatch, the She-cession and older workers' withdrawal from the labor force may account for roughly 70% of the US employment gap compared with pre-Covid levels. In the UK, there has been no She-cession, but about 10% of the employment gap can be attributed to mismatch and 35% to older workers' withdrawal from the labor force.

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Further, the outflow of foreign workers after Brexit — accelerated by the pandemic — entailed a progressive fall in the number of those job seekers willing and able to fill open vacancies. Our analysis leaves a potential, albeit mostly residual, role for other factors such as the effect of elevated unemployment benefits and other pandemic-related income support.

If a larger number of older workers permanently retire and a lack of affordable childcare and pre-school opportunities continue to keep some women with young children at home, the pandemic could leave persistent employment scars, notably in the US.

Whether the reason for not returning to work is early retirement or lack of childcare, one common thread exists: US and UK vacancies are highest among low-skill occupations and employment in these jobs remains below pre-2020 levels. The rise in voluntary quits — the so-called "great resignation" — is also greatest for low-skilled jobs. While it remains to be seen how widespread and persistent this phenomenon will be, these facts hint at a possible change in worker preferences triggered by the pandemic.

To minimize the risk of scarring to employment, addressing the pandemic remains key, so workers are fully able to return to the labor market. So are well-designed training programs to reduce risks of mismatch, and — particularly in the US — expanded childcare and preschool opportunities.

Nearly 900,000 people have died of COVID-19 in the United States, a shocking statistic even more than two years into the pandemic. The economic shock of such a calamity has resulted in a historic labor shortage that economists still don't quite understand.

One of the pandemic's biggest mysteries, the symptoms of "long COVID," may be playing a huge part in the millions of missing workers.

At least 100 million Americans between the ages of 18 and 64 have contracted COVID-19, according to Centers for Disease Control and Prevention estimates, and millions of survivors have reported lingering effects from the virus, ranging in severity from annoying to entirely debilitating. We still know very little about long COVID, but researchers are now projecting that it could be more widespread than initially thought—and it could be making a significant dent in employment. 

Between 27% and 33% of COVID-19 patients still experience symptoms months after infection, studies show. That means at least 31 million working-age Americans might have experienced, or are still experiencing, long COVID symptoms. And that’s a conservative estimate, Katie Bach, a senior fellow at the Brookings Institution who has studied the impact of long COVID on the workforce, told Fortune.

If you assume the lingering symptoms last three months, Bach said, still a conservative estimate, that means about 4.5 million may have been sick while testing negative for COVID at any point over the past 20 months. Two separate studies found that 23% to 28% of long COVID patients were out of work because of their symptoms—so roughly 1.1 million Americans are not working due to long COVID.

An additional 46% of long COVID patients, or 2.1 million workers, have reduced their working hours, according to a study in The Lancet. If you add up all the reduced hours to the long COVID sufferers who are out of work, it's the hourly equivalent of 1.6 million workers.

Economists often invoke the Great Resignation to explain the decline in the labor force, an exodus that was spurred on by a mass reevaluation of priorities due to the extreme mindset shifts caused by COVID-19. Workers increasingly want better pay and benefits, to spend more time with family, and to feel fulfilled by their jobs, the theory goes. Higher household savings that came from an increase in unemployment benefits and long quarantines also help explain why people aren’t working. 

The U.S. is expected to add 150,000 jobs in January, but a report Wednesday showed that payrolls at U.S. companies fell by 301,000 last month, the most since April 2020, according to ADP Research Institute. The labor participation rate, meanwhile, is still well below where it was before the pandemic, down about 1.5 points from January 2020. 

The long COVID numbers affecting employment “were just so much bigger than I thought they could be,” Bach told Fortune. “Those suffering from long COVID could account for more than a third of the drop in workforce participation.” 

Those who suffer from long COVID have trouble deciding whether to apply for disability pay or Social Security, she added, and the burden of proof is confusing and steep. “It's confusing with long COVID because you don’t know how long it will last. Applying for disability is a huge effort. Sometimes it’s easier to just take a month of unpaid leave,” said Bach.