Wisconsin Must Tackle Labor Shortage. That Means Rolling Back Expanded Aid.
It’s an understatement to say that Wisconsin businesses are struggling to find workers. There are more than 132,000 unfilled positions posted on the Job Center of Wisconsin’s website, an increase of 20,000 openings since July.
Nearly every sector of the economy is affected: the service industry, healthcare, transportation, construction, agriculture and production. Steve Kohlman, executive director of the Independent Business Association of Wisconsin, says he has yet to speak to a manufacturer who isn’t hiring.
At the same time, participation in government safety net programs remains elevated. It seems counterintuitive, but as the economy rebounds and employers large and small clamor for workers, food and cash aid caseloads in Wisconsin continue to rise.
Wisconsin policymakers urgently need to address the worker shortage — and the growth of reliance on government programs — if the state is to fully recover from the pandemic-induced recession. A key part of the solution will be rolling back expansions to government benefits and reinstating work incentives.
Labor shortage problems in Wisconsin are not new, but the COVID-19 pandemic accelerated an already troubling trend. Research shows that the pandemic increased retirements among older workers across the nation, resulting in 1.7 million more retirees than were projected at the start of the pandemic. For states like Wisconsin that already were facing challenges from an aging population, the pandemic has made labor shortages even worse.
Lawmakers, therefore, should do everything possible to ensure that government policies encourage, rather than discourage, work. To help households cope with the economic fallout of the pandemic, the federal government expanded a range of benefits — more unemployment benefits, cash stimulus payments and increased food and housing assistance. While these expansions in the spring and summer of 2020 may have been justified at the time, lawmakers now need to focus on the economic recovery, including rolling back government assistance.
A step in the right direction — and a long overdue one — was allowing federal unemployment benefits to expire at the beginning of September 2021, leaving state unemployment benefits intact. Although the relationship between benefits and willingness to work has many complicating factors, particularly during a pandemic, research shows that the availability of unemployment benefits reduces employment because individuals sometimes prefer aid over working.
The labor force participation rate in Wisconsin ticked up slightly in September 2021 to 66.6%, from 66.5% in August, showing some positive signs. But the slow rate of workforce reengagement leaves questions about the long-term recovery of Wisconsin’s economy.
Part of the problem lies in other government benefit programs. In “Employment and the Safety Net During the Pandemic,” a policy brief that I wrote recently for the Badger Institute, I found that the number of people in Wisconsin receiving benefits through the Supplemental Nutrition Assistance Program (SNAP), formerly the Food Stamp Program, and the Temporary Assistance for Needy Families (TANF) program, has continued to grow even though the employment situation has improved tremendously.
While some families became eligible because they lost income during the pandemic, a major reason for the increase is the federal government relaxed program rules even as it increased benefits.
By summer of 2021, the number of Wisconsinites receiving SNAP had increased 30% from the month before the pandemic hit, even though the unemployment rate had almost fallen back to pre-pandemic levels. In fact, the number of SNAP recipients in Wisconsin is near the peak number during the Great Recession, when the unemployment rate was double what it is today. Similarly, the number of people receiving TANF, or cash welfare, continues to grow in Wisconsin, despite a much-improved employment situation.
State officials might feel indifferent to the tremendous growth in these programs because the federal government picks up the tab, not the state. But increased dependency on government programs is problematic for state officials, too, including restricting the upward mobility of Wisconsin families and slowing the statewide economic recovery. Reinstating work requirements and employment services to aid recipients will help them reenter the labor market and will benefit them more in the long run.
Work is the most effective anti-poverty program. The likelihood of being poor when living in a household with at least one full-time working adult is extremely low. In “Wisconsin’s Missing Rung,” a 2020 report I wrote for the Badger Institute, I found that among Wisconsin adults who worked full time all year long in 2017, only 2% were poor, compared with 18.8% who did not work at all that year.
Government programs are contributing to labor shortages in Wisconsin. State officials have a responsibility to make benefits available when needed, but they also must ensure that policies help, not hinder, the employment prospects of individuals. The health of the Wisconsin economy depends on it.
Angela Rachidi is a senior fellow and the Rowe scholar in poverty studies at the Washington, D.C.- based American Enterprise Institute, where she studies poverty and the effects of federal safety net programs on low-income people in America. Rachidi, a Badger Institute visiting fellow, lives and works remotely from Madison.