There’s an old and very obviously true principle of economics that states that when you subsidize something you will get more of it.
This includes, by the way, things like property and unemployment. When you introduce incentives that make it attractive or worthwhile for people to remain poor or unemployed, at least some of them will remain poor or unemployed.
As uncomfortable as it might be for some people to accept this, it is true. This has recently been demonstrated yet again in the city of St. Louis.
Generous Unemployment Benefits Keep People From Working
About a dozen restaurants located in the Central West End portion of St. Louis hosted a job fair at the Chase Park Plaza ballroom on Monday, May 3. As things in the state proceed to open up, businesses are once again hungry for workers and seek to start hiring.
Unfortunately, scarcely any job applications came in to these restaurants as a result of the job fair. And the reason for this, obviously, is that the stimulus checks and unemployment benefits being sent out to people for the ostensible purpose of softening the economic impact of COVID-19 are just too generous.
Especially in places like the restaurant business, where most workers are not paid high formal salaries and must subsist on tips, it is much easier to simply sit home and collect unemployment than it is to work. Add in the fact that restaurant patrons are probably hurting because of the lockdowns and, therefore, have less money to spare in tips, collecting unemployment becomes all the more rational.
Paul Filla, a restaurant manager in the area, pointed out that Missouri’s unemployment benefits max out at $320 per week. Congress also passed a law that boosts unemployment insurance by an additional $300 per week until the end of September. Combined, this means that someone in Missouri can collect more money on unemployment than they would if they worked a full-time job and were paid $15 per hour.
Since most of those who wait tables at restaurants aren’t even paid that much, working at restaurants just isn’t worthwhile right now. The result is a massive manpower shortage in St. Louis’ restaurants.
Filla says that benefits which were originally necessary are now overdone and are actually harming businesses, saying that “what was warranted — what was needed — in Round 1 may not have been what was needed in Rounds 2, 3, 4 or 5.”