Why return-to-work bonuses are the wrong medicine for what ails the labor market

By: - May 21, 2021 3:11 pm

North Carolina Senators are proposing a $1,500 return to work bonus in an effort to bolster employers’ hiring of employees who lost their jobs during the COVID-19 pandemic.   

This isn’t an idea unique to North Carolina. Rather, it’s a copycat proposal making its way around the country as lawmakers listen to the concerns of employers who have not been able to fill positions in recent weeks.   

As we have noted before, the claims that the hiring challenge for employers is due to a labor shortage don’t have much support in the data. More likely is that employers are offering wages that are too low for potential hires to accept, given many will be asked to work under conditions that potentially jeopardize their health. 

The returntowork bonuses don’t address the fundamental fact that the low-wage labor market is not sustainable and working people know it. North Carolina’s current job openings are predominantly in low-wage work; the chorus of employers claiming they can’t find workers are in the industries notorious for low pay and no benefits. In a recent NC Policy Collaboratory article, analysis of the job openings through December 2020 shows growth in low-wage job openings 

In a functioning labor market, employers seeking to fill job openings would be raising wages to bring people back to jobs (and to retain people). Many employers across the country are doing just that and sustainably getting people back to work.  

In North Carolina, however, there is little sign across industries that employers have increased wages in recent months 

House Bill 128 attempts to further tilt the labor market in favor of the already powerful employer and subsidize their efforts to lure people back to low-paying jobs.   

The $1,500 bonus payment offer, however, does not address the fact that many occupations pay below what it costs to meet a families’ needs. Many of the occupations identified in news and employers claims pay below the living income standard of $18.50 for one worker and one child.  

To make matters worse, the proposal would penalize jobless workers who don’t follow strict, costly administrative rules. By doubling down on work search requirements, this bill will do more damage to a recovery that is already inequitable, in ignorance of the reality  that there aren’t enough job openings for the number of candidates in 99 of North Carolina’s 100 counties.  

As researchers at NELP have pointed out, raising the administrative burdens on jobless workers creates barriers to access to critical wage replacement, particularly for workers of color, and increases costs to the public. This in turn diminishes the power of Unemployment Insurance to stabilize spending and allow business to hire based on the fact that they have consumer demand for their goods and services.  

Return-to-work bonuses and work search requirements do nothing to address the persistent barriers that prevent or deter people from returning to work, such as the fact that there are still too few childcare providers in 52 counties across the state. Working parents can’t return to their jobs when care responsibilities remain. Even if a parent can find a slot, $1,500 doesn’t go far in making sure that childcare remains affordable long-term.    

The NC General Assembly needs to get serious about a Back to Work Agenda: one that would fully fund childcare assistance for working parents who can’t afford high quality care in their community and ensure providers have supports to open and pay educators to deliver quality early education to children. An agenda that supports the return to work for more workers would ensure every worker had access to paid leave and workplace protections, and it would make it unacceptable for an employer to pay a minimum wage that leaves its workforce in poverty.   

These are the fixes our labor market needs. This should be the work of our elected leaders instead of distorting the labor market so that powerful employers can get the cheapest labor.   

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