Even expert economists are unsure about where the U.S. economy is headed and what that means for workers. Those questions prompted a new report by the Federal Reserve, led by economists from Philadelphia and Atlanta, which aimed to fill in the blanks left by employment and inflation metrics.
“We were concerned about people who were remaining on the sidelines of the labor market,” said Ashley Putnam, director of the Economic Growth & Mobility Project at the Federal Reserve Bank of Philadelphia. “Why are they hesitant to come back to work? What are their priorities and what are they looking for?”
From May to September 2022, researchers interviewed 168 noncollege graduate U.S. workers and job seekers aged 20-55.
Participants shared personal stories about the challenges of their work or barriers to working — including high costs or unavailability of child care, lack of transportation, and frustrations with finding work despite applying to dozens of jobs.
Many of the stories centered on the subject of pay — whether a job’s wage was enough to justify the costs of going to work, and whether employees were being paid fairly for the tasks they complete, especially as labor shortages create more work for fewer people.
“That aspiration to better wages to meet cost of living was something that was really salient in the Philadelphia group,” said Putnam, noting that Pennsylvania’s minimum wage of $7.25 is lower than most other regions included in the study.
While wages and salaries have been on the rise recently in the region, Pennsylvania’s minimum wage when adjusted for Philadelphia’s cost of living is the fourth lowest among U.S. cities.
But discussions around compensation were also nuanced, Putnam noted.
“Job quality goes beyond wages, and just like everyone else we spoke with across the country, many said it’s not just the money, it’s predictable hours, it’s how I am treated,” Putnam said. “It’s whether or not I feel I have agency or dignity in the decisions being made about me at work.”
People Want to Work, But Obstacles Remain
“People really do want to work, but they’re navigating complex choices,” Putnam said. “They’re thinking really differently about whether or not they want to do work that doesn’t provide stable schedule or predictable income.”
Caregiving obligations and health concerns factor into that thinking, the report said, as well as transportation. Some, who rely on public transportation, said many jobs were unavailable to them because nearby transit options were limited, unreliable or nonexistent, and that was made worse by the pandemic.
“Contrary to the conversation that people do not want to work anymore, we found people who are really interested in work, but they have a lot of other things that they’re considering,” Putnam said.
While participants expressed gratitude for economic stimulus money from the government, they saw it as a way to cushion their income rather than a substitute for working. No participants said they were able to stop seeking employment because they got economic stimulus or unemployment checks.
One participant said unemployment was “terrible” when compared to earning a living wage, explaining “it was so far from what my income was, but it was the most I could get” while job hunting.
Tight Job Market Doesn’t Make Job Hunting Easy
Researchers said many focus group participants were trying to reenter the job market or change jobs but had applied to dozens of openings without getting any response.
“So many people are looking for work that still can’t find it,” one participant said. “All we hear is like the economy’s coming back, the economy is coming back, but how are so many people looking for jobs?”
Meanwhile, businesses are trying change their hiring practices to focus more on skills rather than education or years of experience, said Sarah Miller, of the Federal Reserve Bank of Atlanta, who co-led the research.
“We see positive movement,” Miller said. “But it will take time and commitment.”
Adding to the challenge is that hiring managers are often too busy handling work to make up for short staffing to dedicate time to hiring, she noted. Non-managers are also carrying that burden and finding themselves stretched thin, the study found.
More Work with No Added Reward
Miller noted that the focus groups were held in mid-2022, when the job market was at its hottest and highly paid workers were leveraging new job offers to get big raises.
“Workers at the lower end ... didn’t feel that they had the agency that other workers in the economy did,” Miller said. “There was a fear of asking for more money.”
As a result, lower-income workers were often being shouldered with additional job responsibilities without seeing an increase in pay. Even if they were paid by the hour, they were covering the duties of multiple positions at once during shifts, the report said, and often they were tasked with enforcing health and safety measures.
“We think about the labor shortage as being really beneficial to workers,” Putnam said. “What we were hearing from workers is that the labor shortage is actually (causing) burnout.”
Putnam and Miller said they were somewhat surprised to find that many of the participants would like to start their own companies because of burnout. Some had done so, opening child-care or food-service businesses of their own, but for most, it was an aspiration. If they’re going to be stretched thin at work, they want to see the fruits of that extra labor, they said.
“The main thing we heard about why people want to start their own business really was about agency,” Putnam said. “It was about, ‘I want to be able to earn money for myself.’ ”
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