COVID-19 is not to blame for high inflation for four decades and an unprecedented labor shortage. Rather, bad government policiesoriginally enacted as part of a declared attempt to protect people from COVID-19, are to blame.
Instead of keeping people safe, government policies do more harm than good to public health and welfare, restrict the supply of labor and artificially increase the demand for goods and services .
The current labor shortage is unlike any in US history and is the opposite of what was expected at the start of the pandemic. But when policy makers establish programs that pay many people more money to be unemployed than to work and keep these programs in place 18 months into the pandemic – long after most workplaces have reopened – it should come as no surprise that fewer people will choose to work.
I estimate that employment today is between 4 and 5 million workers below what it would have been in the absence of the pandemic and policymakers’ pandemic responses.
The shrinking supply of workers coupled with an artificial increase in demand for goods and services — due to $6.6 trillion in pandemic-related, deficit-funded federal spending — has made life difficult for employers and consumers.
Job openings—currently at 10.9 million– are 40% above the pre-pandemic record and more than double the average of the previous 10 years. Consequently, employers struggle, with 49% of companies flagging vacancies they are unable to fill.
This means that companies must raise wages to attract workers. Almost half of all businesses salary increase in December while 32% plan to increase their compensation in the next three months.
Higher wages are a good thing when they are due to workers becoming more productive, but when employers have to pay people more to do the same thing, it only raises prices.
And higher prices are eating away at employee wage earnings. Despite relatively strong wage gains of 5.7% over the past year, employees’ real wages have fallen 1.7%, meaning their larger paychecks are buying them less than before.
Quits are another contributing factor to employer struggles and rising costs. Nearly 1 in 3 workers, i.e. a total of 47 million people quit their jobs in 2021. Replacing workers costs employers between six and nine months of those wages, which are passed on to customers through even higher prices.
Instead of spending more federal money and imposing more labor distortions, policymakers should remove the barriers to employment they have created.
This includes eliminating welfare policies without work which began paying people more unemployment benefits than they could earn working – and which still includes massively expanded food stamps and Obamacare benefits. It also includes the reduction or elimination of tax burdens, such as double taxes on investments, which limit wage and productivity gains.
Policymakers should also let Americans get the job they want instead of trying to push everyone into big, unionized workplaces with legislation like PRO law. And they should expand child care options by allowing parents to use Head Start funds with providers of their choice.
The shortage of health care workers is particularly pronounced right now.
Prior to the pandemic, healthcare employment was growing faster than overall employment, but this has since reversed, particularly with the implementation of COVID-19 vaccination mandates.
If healthcare employment had grown at the same rate as total employment in the last three months alone (October to December 2021), there would be 73,000 more healthcare workers today .
On top of that, the federal vaccination mandate for most healthcare workers could take 70,000 or more healthcare workers out of their jobs. Congress should prevent this by protecting the rights of health care providers to set their own vaccine policies.
It’s one thing to be frustrated with longer waits in restaurants due to worker shortages, and canceled flights and canceled school bus routes are major disruptions, but closed hospital units or care delayed or restricted health care endangers people’s health and lives.
Lives are literally at stake due to the shortage of healthcare personnel, and numerous regulations on top of the vaccine mandate unnecessarily aggravate the situation.
While states are the primary custodians of healthcare workers, the federal government can remove unnecessary burdens and promote competition and flexibility to meet America’s healthcare needs.
Some specific actions include:
- Adjust federal health care payments to states to shift the financial burden of poor health care policies onto the states that impose them. For example, 35 states and Washington, DC, have certificate of need laws that require medical providers who want to expand an existing facility or open a new one to prove the “need” for their services. This often requires them to procure detailed analyzes and projections; hire lawyers, lobbyists and consultants; and convince existing competitors not to oppose their entry or expansion. Unsurprisingly, these laws drive up health care costs by about 11%. Congress should adjust federal health care payments to states so that they alone bear the financial burden of their own unnecessary, self-imposed cost increases like these.
- Expand the use of telemedicine by making it easier for doctors to use for Medicare and Medicaid patients and by reforming tax rules that impede the use of telemedicine.
- Reduce the regulatory burden required by federal health care programs. As Dr. Kevin Pham points out in a Heritage Foundation report on looming physician shortages, “Medicare, for example, requires physicians to recertify durable medical equipment (EME) for chronic conditions, such as pumps, every year. insulin therapy for patients with type 1 diabetes. Because these patients are completely unable to produce their own endogenous insulin, their condition should not change from year to year. Time spent on paperwork and regulatory compliance is time not spent treating patients. A whopping 58% of physicians cite red tape and regulatory burdens as their biggest complaints, and nearly half of all physicians plan to retire earlier than expected due to increased burdens.
- Stipulate immediately that vaccination mandates are decisions to be made by health care providers, not politicians.
Facilitate the widest, nationwide labor shortage requires moving people from dependence on government to productivity and self-sufficiency. It requires decision-makers to ensure that work pays and not working does not. They can do this by limiting taxes, allowing larger natural wage increases, opening more doors to flexible earning opportunities, and directing US rights and social protection programs toward work.
This piece originally appeared in The daily signal