MINOT, N.D. — For years, conservatives have been arguing that lavish safety net programs disincentivize productivity and, for just as many years, our progressive friends have told us that this is balderdash.
Then the pandemic came along, and with it a raft of generous economic intervention from the government, including thousands of dollars per-person in direct stimulus payments and, perhaps most notably, expansive unemployment benefits.
Now our progressive friends are moving the goalposts. People aren't going back to work? That's only because employers aren't paying enough? If they'd only offer higher wages, and more benefits, the problem will be solved!
Maybe, I know this is crazy, but just maybe, employers could offer sick time, a good wage and other benefits to attract workers?— Brian Glaeske (@BrianGlaeske) May 11, 2021
It's a position that completely ignores the looming problem with inflation. The consumer price index jumped 2.6% last month compared to a year earlier, according to the Bureau of Labor Statistics, the largest increase in something like a decade. "The food index rose 3.5% over the last 12 months, while the energy index increased 13.2% over that period," the BLS reports.
Fuel prices are spiking.
Utility bills are spiking.
Will a labor shortage driven by lavish government benefits drive up pay and benefits? Almost certainly. Scarcity drives up prices, and that's true of labor as much as it's true of products. But those increases will be paid for, are already being paid for, by higher prices.
What good are higher wages if the gains are offset by a higher cost of living?
There are many reasons why this is happening, but all roads lead back to government interventions in the marketplace, and the most recent and dramatic economic intervention undertaken by the federal government has been the pandemic-era
One basic law of economics is that when you subsidize something, you get more of it.
During the pandemic, we increased our subsidies for unemployment, both in terms of higher unemployment benefits and fewer requirements to search for work to maintain benefits, and the result has been a spike in unemployment that has persisted even as employers search for workers amid our post-pandemic economic recovery.
The problem here is not the safety net. The pandemic was a nearly unprecedented event. A hammer blow that hit our society hard. I think we would have been better off focusing more of our government intervention on subsidizing payrolls to keep people in their jobs, but expanded unemployment benefits were probably a prudent policy too.
The problem is when some try to make these expansions permanent. Or, at least, insist that they persist well beyond the justifying crisis.
“After fighting through severe stress and financial hardship, many North Dakota businesses that survived the pandemic are now facing an unprecedented labor shortage as they attempt to recover,” Gov. Doug Burgum said in a press release announcing North Dakota's termination of pandemic-era unemployment benefits. “These federal unemployment programs were meant to supplement state benefits and provide short-term relief for displaced and vulnerable workers, and these programs have accomplished their goals but are now counterproductive. Safe, effective vaccines have been available to every adult in North Dakota for months now, and we have an abundance of job openings with employers who are eager to hire.”
He's exactly right. The only quibble we could make is that this probably should have happened months ago.
And, going forward, we should remember this policy lesson. While a safety net is appropriate, when that net turns into a hammock, what we will see is higher levels of unemployment and economic stagnation.
To comment on this article, visit www.sayanythingblog.com
Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at firstname.lastname@example.org.