The Atlanta Federal Reserve recently forecast that second-quarter gross domestic product will fall by 1.9 percent. If her model proves correct, the US economy has fallen into a recession with GDP shrinking for two consecutive quarters. Whether we’re technically in a recession is far less important than the fact that Americans have been in recession for months. At this point, as historical inflation continues, Americans are also likely to suffer stagflation.
The bad economic policies of the Biden administration bear a lot of responsibility. So, the administration and congressional Democrats are trying to distract from the shrinking economy and runaway prices by pointing to a supposedly strong labor market. They argue that the country is not in a recession as long as the unemployment rate remains low. As with many, we’ve heard from this management, it’s just not true.
On Friday, the Labor Department announced that the economy created 372,000 jobs in June and the unemployment rate was stable at 3.6 percent. President Biden has been constantly bragging about the supposed historic job creation under his watch, taking credit for people returning to work after the pandemic.
However, the job market is not as rosy as the core unemployment rate suggests. More than 500,000 people are still working less today than they did before the pandemic despite the V-shaped recovery that Biden inherited from President Trump.
However, employers are desperate for employment. There are 11.3 million vacancies nationwide. That’s roughly two jobs for every unemployed person. This obviously raises the question: Why are fewer people working than before the pandemic?
Well, the answer is also clear. There are not enough Americans willing to work. The labor force participation rate is still well below the pre-pandemic level. In fact, if labor participation today had been the same as when the pandemic began, the unemployment rate would have been 5.5 percent. It’s only 3.6 percent because fewer people are working or actively looking for work.
Generous welfare programs, which expanded during the COVID-19 pandemic, help explain this labor market paradox.
For most of 2021, supplemental federal unemployment benefits and child tax credits, distributed monthly, paid most entry-level workers more for staying at home than for returning to work. A June 2021 study by economists for the Unleash Prosperity Commission found that a family of four with two unemployed parents earns about $72,000 in unemployment benefits, more than the national median household income.
These programs came to an end thanks to brave policymakers, primarily Republicans, who recognized their unintended economic consequences. While these programs were necessary during the pandemic when state governments told people they couldn’t act, their devastating impact on American work ethic remains. It is hard to deny the fact that some Americans are clearly accustomed to not working and have chosen to live on the luxuries that remain rather than returning to the workforce.
This is not a criticism of people who are in dire need of government assistance. We are a rich nation. We must, and in doing so, help those in need. But healthy people must work for the good of society, for their own self-interest, their dignity, and their sense of self-worth. President Clinton and Newt Gingrich confirmed this idea when they largely enforced labor requirements for welfare recipients in the late 1990s. It’s a simple idea – those who can work should do so.
Welfare improvements in the era of the pandemic that are still in effect have helped the current reluctance to work ethic. For example, Congress has expanded food stamps and removed business requirements for receiving them. The USDA gave states an “emergency appropriation” for food stamps that persisted long after the pandemic emergency ended.
In October, the Biden administration implemented the largest permanent increase in food stamps in the program’s history. The average food stamp allowance is now nearly double what it was in 2019. Initially, the number of households on food stamps has not decreased significantly since the pandemic ended.
The public health emergency also allowed states to increase Medicaid enrollment by 20 percent and prevented them from removing residents from the program even though many of them likely no longer qualify. They can’t do that until the Biden administration announces the end of the public health emergency.
These welfare expansions add to a variety of general benefits Americans already receive outside of work, including unemployment insurance, housing stamps, energy subsidies, childcare subsidies, and direct cash assistance. In addition, states offer their own social programs. Together, they rise to the trap of government dependency, discouraging work.
Employers across the country have told me that their employees routinely make the rational decision to drop out of the entire workforce — or at least take a break from it — backed by this generous help.
Again, we must help people who can’t help themselves as these programs do when properly distributed. But incentives are important and so should those who can work.
Congress should immediately roll back this extended welfare, restore associated labor requirements, and reform long-running programs to help the labor market reach and pass the pre-pandemic peak — which would help reduce inflation as employers hire their businesses and renew the supply chain that Allow the economy to recover for the benefit of all.
However, public policy solutions may be insufficient if we delay in taking action. Employers have also told me about a deteriorating work ethic among a large group of young Americans today that goes beyond financial considerations. These workers are quick to quit smoking at their first challenge. They are not willing to make the effort to learn and improve. They regularly turn down work shifts and even opportunities to get overtime pay. If you think I’m being unnecessarily criticized, talk to a local employer.
Fully re-establishing an American work ethic is a long-term project. Unfortunately, the economic problems that the country is facing are here and now. If our elected leaders are unwilling to acknowledge the problem, let alone address it, expect a deeper and longer recession as a result. If we don’t restore the American work ethic, expect much worse.
Andy Puzder is the former CEO of CKE Restaurants, President of 2ndVote Value Investments, and a Board Member of the Job Creators Network.