Understaffed Retailers Are Competing against Unemployment Checks — and They’re Losing

O ver the winter Anna Shickel was putting in seven-day work weeks at her Needham, Mass., CBD shop, trying to keep the small business afloat during the pandemic.

She was so busy with the store that she didn’t have enough time for her primary job as a speech pathologist. In February, she spent a few hundred dollars to place an ad on Indeed.com, hoping to hire a couple of workers to help carry the load. She offered $17 an hour, plus bonuses. She thought it was a competitive wage to work behind the counter selling CBD products, which are derived from the cannabis plant but are not psychoactive, and are used to treat inflammation and other ailments.

Shickel lined up interviews with seven people. None of them showed. She eventually interviewed a couple of potential employees, but they turned down her job offer. Finally, Shickel lined up a worker, but the worker asked to delay her start date until her unemployment benefits ran out, further delaying Shickel’s return to her speech pathology job.

Then, in early March, Congress passed President Joe Biden’s $1.9 trillion stimulus plan, extending weekly $300 federal unemployment benefits through Labor Day. The new employee Shickel had worked so hard to hire decided against coming aboard after all, she said.

“She said, ‘Now I get my benefits until September, so I don’t want to work. It doesn’t make sense. I’m making more money at home,’” said Shickel, who’s still looking for employees.

Shickel is not alone in her struggle to find workers. Across the country, businesses in a variety of industries are dealing with a labor shortage that is hampering their ability to fully reopen just as consumer demand is roaring back. In Iowa, Deere  & Co., the maker of John Deere tractors and one of the state’s most prominent employers, can’t find enough workers to fill its plants. A tire-making plant in western New York is having the same problem. Restaurants in Florida and across the country are struggling to find kitchen and wait staff. A McDonald’s in Tampa was offering people $50 just to show up at an interview, according to Business Insider.

An April report by the National Federation of Independent Business found that since January, a record 44 percent of business owners reported job openings they couldn’t fill.

With U.S. job growth falling far below expectations in April (the largest miss in over 20 years), some critics are pointing fingers at the extended federal unemployment benefits. Businesses, they say, are being forced to compete with government handouts that incentivize people not to work just when employers most desperately need them back on the job. Some southern states, including Tennessee, Alabama, and Mississippi, have withdrawn from the federal pandemic benefits.

White House Press Secretary Jen Psaki said this week that federal officials don’t believe the $300 jobless benefits are stopping people from rejoining the workforce. U.S. labor secretary Martin Walsh, the former mayor of Boston, agreed. “I just don’t see it,” he said. “Most Americans would rather be working.” But employers and business owners across his home state, including Shickel, are pushing back, saying that’s exactly what’s happening.

No state offers more generous unemployment benefits than Massachusetts; they max out at over $800 per week, plus the $300 in federal money. And the state has among the least-restrictive eligibility requirements in the country, said John Hurst, president of the Retailers Association of Massachusetts. Hurst said the $300 federal unemployment benefits are a big story nationally, but in Massachusetts, “the $300 was the cherry on top of the sundae.”

“That’s a pretty strong incentive to spend the summer at the beach,” Hurst said of the combined state and federal unemployment benefits.

Hurst said he believes the overly generous unemployment benefits are the primary reason for the current labor shortage in Massachusetts. Before vaccines were readily available, people had legitimate concerns about returning to work, and many parents had to stay home with kids who were learning remotely. But now vaccines are readily available — Massachusetts has one of the highest percentages of vaccination in the country — and most schools have reopened.

“Maybe there’s a handful of people still in those worlds,” he said, referring to people who can’t get vaccinated or have young kids still out of school, “but the vast majority of reasons [for the tight labor market] at this point is just because of the dollar amount.”

Neil Abramson, who owns four consignment and resale stores in Leominster, Mass., including a children’s store called Cutie Patuties, hasn’t been able to return to his pre-pandemic hours, even though customer demand has returned. He’s got 17 or 18 employees at the moment, he said, but he really needs 25. He doesn’t want to put too much stress on his staff.

Last year and earlier this year, there wasn’t enough store traffic to justify longer business hours. But now he’s closing his doors at 5 p.m. instead of 7 p.m., and turning customers away.

“It’s incredibly frustrating, because you’re leaving money on the table,” Abramson said. “This is revenue that you need to grow out of this [pandemic]. You need every bit of revenue that you can to grow out of this. And we’re leaving money on the table, but we’re doing it for the sake of all our well-being, for the sake of our team, for the sake of my wife and myself.”

Abramson said he’s been advertising jobs, but the applicants are “few and far between.” He is getting some young kids to apply, but he needs someone with more experience to help lead one of his stores, and he needs a driver to move product between stores. He was advertising the driver position at $15 an hour, up from $13 an hour last year. He said he’s willing to pay $16.

Walsh, the labor secretary and former Boston mayor, said workers should expect their salaries to increase, and “there’s nothing wrong with that.”

But Abramson said, “There’s only so much money to pay. There isn’t more money.”

Abramson said it’s frustrating that he’s competing for workers with the unemployment system.

Even more frustrating, Massachusetts businesses — even businesses that didn’t lay off a single employee during the pandemic — have just been hit with skyrocketing unemployment-insurance tax bills. Millions of unemployment claims early in the pandemic swamped the state’s unemployment trust fund, which is expected to face a nearly $4 billion deficit this year. Unemployment claims were then sent to a solvency fund, which spread the burden to all employers, whether or not they laid off employees during the pandemic, according to a MassLive report.

“They’re paying [people] to spend the summer at the beach, and not come back and go to work,” said Hurst, with the retail association, who’s called for a legislative fix. “And those that are coming back to work, they’re getting paid a lot more than they did 15 months ago, because that’s just what these small businesses are having to do.”

“It raises the question of whether they’re going to be profitable or not,” he said.

Judy Herrell, the owner of Herrell’s Ice Cream in Northampton, Mass., was able to keep eight of her 30 employees on the payroll through the pandemic, in part because of Paycheck Protection Program loans. She, too, has struggled to staff up over the last couple of months, but she thinks there’s more at play than just generous unemployment benefits.

In March, Herrell lined up 19 interviews, but only five people showed up. She started reaching out to the people who didn’t come to find out what was going on.

One person told her they would make more money on unemployment, she said, and another didn’t want to wake up early (the shop opens at noon). But more often, the people she talked to said they were either still afraid to wait on the public, or they had become accustomed to working from home.

“I think that it’s a little bit difficult emotionally and cognitively for them to make that change, to go back into the workplace,” Herrell said.

Vernon Smith, the owner of the Brewster Fish House on Cape Cod, said businesses in his community are facing a perfect storm: generous unemployment benefits are keeping people at home, skyrocketing housing costs are making it harder for young people to live and work in the area, and fewer foreign workers are able to come for the summer season.

Smith said he has only about a dozen employees at the moment but could use up to 20.

“We’re having problems even getting people to respond to ads,” Smith said. “It is probably more of a challenge in the back of the house, in terms of kitchen help, cooks.”

Without more workers, he’s able to open only five days per week instead of his normal seven. Smith makes the bulk of his money during a ten-to-12-week period over the summer. That was difficult last year, when his restaurant had to convert from a fine dining to a takeout operation, and it will continue to be hard this year with fewer days on the calendar to make money. He, too, was able to keep his business afloat with PPP loans, he said. He wasn’t alone.

“We’re all fighting for help on the Cape,” Smith said.