Prior to the COVID-19 pandemic, Main Street optimism reached an all-time high and small business investment was climbing to historic levels. The unemployment rate was at a 50-year low, and was clocking in at historic lows for minority workers, women, and those without a high school degree.
As the country continues to rebuild from the pandemic, Main Street businesses are facing headwinds trying to find workers; paying people more through unemployment benefits than they could make working will make that challenge more difficult.
According to the NFIB Small Business Optimism Index for November 2020, optimism among small business owners dropped 2.6 points. According to NFIB, “finding qualified employees remains a problem for small business owners.” Nearly 90 percent of these entrepreneurs have reported that they are struggling to find applicants for open positions. In fact, one in five small business owners say that they have received no qualified applicants.
“Small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election, which is shaping how they’re viewing future business conditions,” NFIB Chief Economist Bill Dunkelberg said. “The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.”
Part of the reason small businesses struggled to bring workers back to the job was thanks to the $600 weekly unemployment benefits that Congress created as part of the CARES Act. As NPR reported when the expanded benefits first took effect, the benefits resulted in businesses competing with unemployment for workers.
“Economists at the University of Chicago estimate that more than two-thirds of the workers on unemployment insurance are making more in jobless benefits than they did at work — in some cases two to three times as much,” NPR reported.
This issue is not contained in a particular geographic area either. According to the last few volumes of the Federal Reserve Bank’s Beige Book, generous unemployment benefits prevented businesses from the New York, Atlanta, Chicago, Minneapolis Districts, as well as others, to hire.
As a response to inaction from House Democrats, President Trump extended expanded unemployment benefits through mid-September at a lower amount of $300 a week.
While this was needed action during the midst of the pandemic when businesses across America were closed and workers were told to stay home, today’s small business optimism report suggests that Main Street needs help bringing workers back to the job, not further incentives to help them stay out of the labor force.
As Congress continues to debate further stimulus, some Democrats are arguing for re-starting expanded weekly unemployment benefits at the $600 level again. As economists have pointed out, this could result in reduced employment – potentially hurting America’s path to rebuilding the greatest economy in a generation.