Due to 'Unemployment Benefits > Minimum Wage,' Americans Are Not Working... Severe Labor Shortage

Bank of Korea 'Overseas Economic Focus'
BOK "Temporary Factors... Labor Shortage to Ease When Unemployment Benefits End"

[Asia Economy Reporter Kim Eun-byeol] As economic activities resume in the United States, there are many job openings, but a significant number of people are still not returning to work, intensifying the labor shortage. However, it is analyzed that the labor shortage will ease once the government-provided unemployment benefits end.

According to the "Overseas Economic Focus" released by the Bank of Korea on the 6th, the number of job openings in the U.S. in March reached 8.12 million, with a vacancy rate of 5.3%, the highest since the index was established in 2000.

The increase in the number of employed persons in April by 266,000, which fell far short of the market expectation of 1 million, is interpreted as a result of delayed return to work by the unemployed, leading to a shortage of labor supply.

Accordingly, companies such as McDonald's, Amazon, Chipotle, Walmart, and Costco have announced plans to raise average hourly wages. McDonald's plans to increase wages by 10%, and Walmart will raise the average hourly wage to $15.

Currently, receiving unemployment benefits from the federal and state governments often exceeds the average hourly wages paid by major companies, leaving many with little incentive to work. The Federal Reserve Bank of San Francisco analyzed that the federal government's additional unemployment benefits ($300 per week) lowered the cumulative employment rate (the rate of unemployed persons transitioning to employment, estimated at an average of 25% from January to April) by up to 3.5 percentage points during the first four months of this year.

Including state unemployment benefits, recipients can receive up to $600 per week, which translates to $16 per hour, more than double the federal minimum wage of $7.25.

However, the Bank of Korea assessed that "the recent labor shortage is mainly due to temporary factors such as excessive unemployment benefits, childcare gaps, and concerns about infectious diseases rather than structural causes."

The additional unemployment benefits program is set to end on September 6. Recently, more than 20 states, including Florida, have decided to end the unemployment benefits program early in June or July to encourage the unemployed to return to work. Goldman Sachs stated, "As school attendance normalizes, the labor shortage is expected to gradually ease."