Orazem: Why hiring is so hard

May 24, 2021

Dr. Peter OrazemPeter Orazem, university professor, was a guest on the May 21 Iowa Public Radio program River to River.

The show featured the difficulty employers are having in hiring employees for open positions.

"If you look at data from the US Bureau of Statistics, they compile numbers on vacancies and the number of hires, and there were 1.8 million vacancies last month than there were hires. So there's a huge excess demand for workers. There are various factors that people have pointed to and none of them seem to have the complete story. One is that there's been a reduction in the availability of daycares. So if you look nationally at the number of daycare workers, it declined 14%, so a lot of daycares have closed and that means that more parents have to stay home. And one of the ways to stay home is to drop out of the labor market."  

"A second is that there are people who are concerned about the pandemic and they feel that they'll be more exposed to the disease if they're at work, and so if they can't work from home, they also drop out of the labor market. The third reason people are pointing to is the historically large added compensation for unemployment benefits and that increases the incentive to not work and to stay at home."

"It's awfully hard to identify these things in real time because the data comes at a lag, but we will have a unique opportunity where 22 states, including Iowa, have said that they're going to abandon the extra $300 per week for unemployment benefits within the next month. When that happens, we should be able to see if we get a surge in labor force participation in those states relative to the states that are retaining that. I think that natural experiment will be a rare opportunity for everybody in the US to see what we mean by a policy experiment."

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