In state where labor force participation is low, Reeves & Gunn are right on unemployment

*Appeared in the Laurel Leader Call newspaper  

Gov. Reeves recently announced he would be ending the state’s participation in extra federal unemployment benefits, saying that Mississippi no longer has a need to opt into programs like the Pandemic Unemployment Assistance which Congress passed last year to alleviate the impact of job losses due to COVID-19.  

 

In a letter, Speaker Philip Gunn had urged the Governor to end the program, stating that “small businesspeople…inform us their businesses are at risk.  They report that they cannot get employees to return to work because they can earn more from combined federal and state unemployment benefits than their normal wages.”

 

According to the Bureau of Labor Statistics (BLS), which measures wages, the mean hourly wage in Mississippi as of May 2020 was $20.00.  This means an individual working 40 hours per week will earn, on average, about $800.  Compare that to what an individual can currently earn by claiming unemployment – a maximum of $235.00 per week plus another $300.00 in the extra federal pandemic stipend for a total of $535.00 per week.  While this amount is roughly 33 percent less than what an individual can earn from working, it does represent a significant increase over “normal” unemployment benefits – an increase of more than 128 percent.

 

That means unemployment benefits, when including the federal supplement, have more than doubled for recipients.  Economics teaches us that this type of increase has an impact on human behavior.

 

It reminds me of what my old economics professor at Vanderbilt used to say…a lot. He’d always talk about “incentive alignment,” and while his examples were not usually unemployment-related, the same concept remains true here.  If individuals can earn nearly as much by filing unemployment as they can by working a job, then some (not all) will be incentivized to choose the former approach.

 

That’s particularly troubling in a state like Mississippi, where the labor force participation rate has lagged behind the nation for decades.  As of March 2021, the state’s labor force participation rate (meaning the number of people in the workforce, including those with jobs and those actively looking for jobs) was 56.1 percent, according to the BLS.  The U.S. rate stood at 61.5 percent for the same time period. 

 

When I was worked for former Gov. Haley Barbour, I led a project on the state’s labor force participation rate.  We commissioned a study from the W.E. Upjohn Institute for Employment Research to delve into why Mississippi’s workforce lagged behind our neighbors and the nation.  While the study is now about a decade old, many observations remain poignant today. 

 

“Labor force participation is a key social indicator because the economic performance of a state and the well-being of its residents are closely tied to labor force outcomes. Together, the labor force participation rate (LFPR) and the unemployment rate are of paramount concern to state governments because living standards and consumption are so closely tied to work and earnings from employment,” the paper began. 

 

It studied many reasons why individuals dropped out of the workforce and ultimately concluded that contributing factors were Mississippians living in non-metropolitan areas, Mississippi having a higher percentage of residents who had not completed high school and having a lower percentage of residents who had a college degree, and – you guessed it – the incidence of government income transfers, such as Social Security benefits and unemployment benefits. 

 

I am not an opponent of the state’s unemployment insurance program.  I believe it can and does serve an important societal purpose as a temporary stop-gap for those individuals who lost jobs through no fault of their own and are actively seeking other employment.  However, this program was never designed to be a permanent income solution and, with misaligned incentives, can do more harm than good to the state’s economy.

 

Like our state itself, Mississippi’s labor force market is complicated.  There are many reasons for low workforce participation, and it would be overly simplistic to say people aren’t searching for jobs just because they’re getting bloated benefit checks.  But policymakers must not ignore proven economic theories about the impact of government income transfers on labor force participation.

 

And…that’s a long, wonky way of me saying that I ultimately agree with both Gov. Reeves and Speaker Gunn in their opposition to extra federal benefit checks for the unemployed. 

 

Labor bosses try new tactics as union membership dwindles

*First appeared in the Feb. 12th edition of the Laurel Chronicle newspaper.

In January, the Bureau of Labor Statistics released its annual report on union membership in the United States. The report, aptly titled “Union Members – 2013,” included some interesting statistics.

In 2013, the union membership rate was 11.3 percent, or 14.5 million workers. This is a significant decline below the first year for which comparable data was collected (1983), when more than 20 percent, or 17.7 million workers, participated in unions. Today’s figures equal about 18 percent fewer unionized workers than in ‘83.

We often stereotype unions, and there’s probably a reason for that…or at least according to the 2013 data. At 35.3 percent, public sector workers had a union membership rate more than five times higher than that of private sector workers (6.7 percent rate). Within the public sector, the union membership rate was highest for local governments (40.8 percent), which includes heavily unionized occupations like teachers, police officers, and firefighters.

I joke about those “liberal states” like California and New York, and guess what? Turns out they have the most union members, with 2.4 million and 2 million workers calling California and New York home, respectively. No big surprise there, huh?

It’s interesting to note that over half of all American union workers live in just seven states (California, New York, Illinois, Pennsylvania, Michigan, New Jersey, and Ohio), even though “these states accounted for only one-third of wages and salary employment nationally.”

Curiously, Democrats control the governorships of three of those states, while Republicans control the governorships of the other four. Maybe union members are coming around to Republican ideas?

In Mississippi, we are one of nine states with union membership below 5 percent. In 2013, 3.7 percent of workers were members of unions. The rate increases to 4.2 percent when you include both union members and workers who report no union affiliation but whose jobs are covered by a union or an employee association contract.

Mississippi’s low rate of unionized workers is in line with other southern states. The report notes that “all states in the East South Central and West South Central divisions had rates” below the national average.

Despite the dwindling membership rolls of unions, labor bosses haven’t given up the fight just yet. Their heyday appears to have been a thing of the past, but make no mistake: They still wield considerable political influence (and the corresponding PACs to provide it), particularly in Democrat circles.

I guess it’s no surprise that unions have begun to focus on the southern region as a way to beef up membership rolls. The automotive industry has been targeted by labor bosses who call for the unionization of southern autoplants, including at the Nissan plant in Canton. While their efforts in our state haven’t yet been successful, one can never rule out the tenacity of unions. They are, after all, driven by a desperate need to bolster membership rolls and, in turn, bank accounts.

Whether their efforts will succeed is anyone’s guess, though it appears to me that, for now at least, most Americans view unions – and their role in the workplace – as a thing of the past.