Covid-19 caused serious economic and employment problems affecting millions across the United States. The effects of the pandemic are still creating financial troubles for the US government. Italy’s newly elected prime minister decided to take serious measures to combat the financial burden on the country. Let’s explore how unemployment during Covid is now affecting the post-covid-19 economy with Ehline Law and our work comp personal injury attorneys.
During Covid-19, many people suffered from massive layoffs worldwide, including in Italy. The country’s government at the time introduced a welfare scheme that would send checks to unemployed individuals, helping them cope with the financial strain of unemployment.
However, as the economy opened up and businesses started to reach their pre-covid-19 levels, those receiving the checks continued to remain unemployed and feed off the country’s welfare program.
We’ve seen the same massive overuse and unnecessary abuse of government programs in the United States, but Italy has decided to do something about it.
Italy’s newly elected Prime Minister, Giorgia Meloni, is looking to implement stringent policies that would help alleviate the financial burden the government is facing from unemployed residents. People have gotten too comfortable sitting at home while a steady check arrives every month, paying for their expenses.
One of the measures Meloni wants to implement across Italy includes combatting the abuse of state welfare programs. The new policy will cancel all social benefits the government provides if the citizen refuses a viable job opportunity to remove the individuals gaming the system from the welfare programs.
In 2019, the Italian populist party, called the Five Star Movement, introduced the citizen’s wage program that currently pays out checks to 3.5 million unemployed workers. These are perfectly abled citizens who can work but choose to enjoy the state’s unemployment benefits.
Although many working-class citizens in Italy support such an economic policy that would bring Italy back to pre-Covid 19 levels, others are against these “harsh” policies.
Meloni’s critics slammed the new 21 billion euros budget that combats inflation and provides opportunities in the labor market. However, the prime minister deemed the budget as “courageous” and something that the country needed.
The United States is experiencing the same problem plaguing the economy. Some people are enjoying unemployment benefit payments and taking advantage of the free government money. However, when the republicans voice their opinions about such issues, the media, democrats, and critics demonize the party for having extreme views.
The Republicans speaking about the abuse of such welfare programs and unemployment benefits are not against these programs but instead are anti-welfare abuse.
According to the US Bureau of Labor Statistics, state and federal unemployment benefits equaled $704 billion between March 2020 and July 2021, much higher than any period in the history of the United States. A week into the pandemic, 46.2 million people received their unemployment benefits check, almost three times more unemployment claims than what people received in 2009.
3.5 million workers lost their employer-provided health insurance, creating a severe problem for the citizens and forcing the government to introduce the coronavirus relief bill for disadvantaged workers. The coronavirus relief bill expanded unemployment benefits by adding $600 in unemployment insurance benefits (UI benefits) to the usual state benefits and incorporated gig workers and self-employed workers.
When the pandemic peaked in the United States, over 120,000 businesses shut their doors temporarily to weather the ripples sent across the economy, resulting in 30 million citizens losing their jobs. However, as the economy slowly returned to pre-pandemic levels, so did the job openings.
Recently, the United States Chamber of Commerce collected data on the labor force participation rate, unemployment rates, and job openings in the country to analyze the trends. In 2021, the businesses opening up again added 3.8 million jobs to the economy, but there are still three million fewer people participating in the workforce than in February 2020.
The labor force participation rate has decreased from 63.3% to 62.3%, suggesting that there are non-disabled American workers who choose to sit on the sidelines, causing a severe labor shortage in the country. However, that is not the only reason there is a labor shortage.
After the fear and threat of Covid-19 subsided and the economy slowly opened up, small businesses went through a quicker employment recovery phase than large businesses, leading to higher vacancies. Currently, there are 10 million job openings and only 6 million unemployed workers. If all the unemployed workers entered the workforce, there would still be 4 million job openings.
The US is facing a serious labor shortage problem created by the aftereffects of the pandemic. Even if the United States government cut employment benefits for those rejecting jobs in the country, similar to what Italy is planning, it would not fill the gap between the supply and demand of the labor force.
Providing unemployment benefits is just one of the factors of labor shortage, but the problem the country is facing is much greater.
The impact of federal unemployment compensation and the increase in savings led Americans to add more than $4 trillion to their savings accounts. 68% of claimants earned more with unemployment benefits than when they were working.
Higher savings and unemployment benefits provided greater economic stability for the citizens, allowing them to sit out of the labor force.
In October 2021, Covid-19 led more than 3 million adults to retire early, with the US Chamber of Commerce report revealing that the number of adults detaching from the workforce (aged 55 and above) grew to 50.3% in the third quarter of 2021. Early retirements added extra pressure on the labor market, causing a shortage of skilled workers.
In the United States, even before the pandemic, there was a shortage of childcare services, and during the pandemic, it worsened as many childcare providers closed or scaled down.
The recovery is not swift, and the childcare industry employment level fell 10% before pre-pandemic levels. Due to this, 3.5 million working mothers left their jobs, driving the working-mom participation rate from 70% to 55%.
In the last two years, there were 10 million new business applications, suggesting a rise in people who decided to quit their jobs during Covid-19 to pursue a business idea. The United States also experienced the “Great Resignation,” where many left their jobs for more free time or better opportunities.
Understanding why workers are not filling the available vacancies is just one-half of the equation. There is a need to implement solutions to address the labor shortage in the United States and retain the existing workers.
Michael is a managing partner at the nationwide Ehline Law Firm, Personal Injury Attorneys, APLC. He’s an inactive Marine and became a lawyer in the California State Bar Law Office Study Program, later receiving his J.D. from UWLA School of Law. Michael has won some of the world’s largest motorcycle accident settlements.