As the country recovers from the forced lockdown of businesses during the COVID-19 pandemic, state and federal officials are finding novel ways to kick start the economy, but in the process they are distorting the economic structure of a capitalist society and creating the potential for rampant inflation that will only increase the economic pain for the country.
Last week N.C. House of Representative Chuck Edwards, a Republican representing the western counties of Henderson, Transylvania and Buncombe, proposed that the state incentivize the unemployed to seek work with a $1,500 check should they find employment by June 1. He went further, suggesting that any other unemployed residents who find work by June 30 receive an $800 bonus.
As Rep. Edwards was making his proposal, N.C. Governor Roy Cooper signed an executive order requiring recipients of the state’s unemployment benefits to prove they are actively searching for a job by registering with the state’s workforce system, NCWorks, in order to continue receiving those benefits.
Both of these proposals represent the typical response of throwing money at the problem with no realistic solution, just to make the problem disappear.
David Bass, a contributing reporter for the Carolina Journal, noted that in a recent letter from the North Carolina Restaurant and Lodging Association (NCRLA) the hospitality industry alone is in need of easily 70,000 employees. That letter goes on to note, “Furthermore, there are 250,00 people in North Carolina currently receiving unemployment benefits each week….Yet NCWorks lists over 200,000 current job openings in the state, and this does not include every opening since not all employers utilize the system.”
The need for employees is so great that many businesses are offering their own incentives. A recent help wanted sign posted at Murphey gas stations promotes flexible schedules with an added offer of educational assistance. Some fast food restaurants in the area are so desperate that they are offering signing bonuses of upwards to $500 for anyone who is hired.
With the number of job openings equal to, if not exceeding, the number of people seeking employment, why is there a need for added government incentives?
Part of the answer lies with the need to spend new-found federal Covid Relief Funds amounting to $5.6 billion for North Carolina. In an effort to find recipients of these monies, programs such as Rep. Edward’s proposal are being presented. But throwing money at people to incentivize them to seek employment is the wrong approach
Unemployment benefits are designed as a safety net for those who have lost jobs, as occurred in the past year’s pandemic quarantine, providing a financial bridge for a finite period of time as new employment is sought. Granted the new found jobs may not be what the individuals are seeking, but a pay check is a pay check and that should be the first consideration.
Jobs are available and employers are already finding it difficult to get jobs filled because many potential employees are still concerned about their health resulting from contact with the public since the pandemic is not totally defeated. The federal government’s confusing message about the value and benefits of face masks, which has only heightened fears for would-be employees returning to the workforce, is not helping the matter.
State and federal government emergency programs are compounding the problem for private sector employers by either incentivizing the employees to stay at home with unemployment benefits that are equal to or greater than their wages, or by setting up an incentive package that could be expanded if the unemployed decide to wait for a larger bonus check.
Ironically, the private sector is competing with itself since these benefits that are incentivizing unemployment are financed through unemployment insurance which is supported by the employers.
All of these government incentives will lead to increased costs that invariably will lead to demands for increased wages which in turn will lead to increased costs. And the cycle will continue. This circular pattern is better known as inflation, which results in economic disruption penalizing the average American.
The concept that finding work should be incentivized by a government check, no matter state or federal, is inherently destructive. Dame Margaret Thatcher, the first woman and longest serving British Prime Minister of the 20th century, clearly understood this fact when she said, “Once you give people the idea that all this can be done by the State, and it is somehow second-best or even degrading to leave it to private people…then you will begin to deprive human beings of one of the essential ingredients of humanity- personal moral responsibility.”
The best thing for the economy, for society and for the state is that government should step back, conserve the finances on hand as a contingency for unexpected events, and allow the private sector and individual initiatives to work. That will do more to put North Carolina back on the road to sustainable recovery.