How the business lobby created the "labor shortage" myth — and GOP used it to slash benefits

Republican governors weaponized weak jobs report to cut unemployment aid — as the result of a year-long strategy

By Jon Skolnik

Staff Writer

Published May 19, 2021 6:00AM (EDT)

South Dakota Gov. Kristi Noem addresses the Conservative Political Action Conference held in the Hyatt Regency on February 27, 2021 in Orlando, Florida. Begun in 1974, CPAC brings together conservative organizations, activists, and world leaders to discuss issues important to them. (Joe Raedle/Getty Images)
South Dakota Gov. Kristi Noem addresses the Conservative Political Action Conference held in the Hyatt Regency on February 27, 2021 in Orlando, Florida. Begun in 1974, CPAC brings together conservative organizations, activists, and world leaders to discuss issues important to them. (Joe Raedle/Getty Images)

Earlier this month, the Department of Labor released a less-than-stellar jobs report that sent politicians, economists and leaders in corporate America scrambling for answers. That report details an approximate 71% drop in job growth paired with a slight hike in unemployment, falling far below analyst expectations of a month-over-month boom. This prompted many "mainstream" or conservative pundits, along with Republican elected officials, to point toward a prime suspect: unemployment insurance. 

Their logic is simple: if people are getting paid to do nothing, they have no incentive to do anything. But Democrats have argued that the reality is far too complicated to chalk up to one factor. Treasury Secretary Janet Yellen attributed the disappointing jobs report to a lack of proper child care and lingering fears about the pandemic. Others have pinned the blame on employers, citing low wages and poor working conditions as reasons why Americans might be more hesitant to rejoin the workforce. 

Nevertheless, over the past two weeks week, a narrative about "labor shortages'' and the allegedly corrosive effects of overly generous unemployment benefits, has been force-fed to the American public. Within a matter of days, at least 16 state governors — including such nationally prominent Republicans as Kristi Noem of South Dakota, Doug Ducey of Arizona and Brian Kemp of Georgia — seized the opportunity to slash or eliminate aid to the jobless, even as the U.S. struggles to recover from the effects of a global pandemic.

Given how effective this "labor shortage" narrative was in driving reactionary GOP policy, it seems worth unpacking exactly where and how it arose. Several observers on the left have argued that it emerged from "explicitly ideological think tanks and explicitly ideological right-wing projects," as Henry Williams, co-founder of the Gravel Institute, put it in an interview with Salon. It then "trickled outward" through mainstream media sources, effectively cleansed of its right-wing roots.

Conservative think tanks and other institutions, Williams said, "will facilitate studies, analyses and articles that can then be laundered through various communications arms through their press releases." That material then appears in local media or the seemingly neutral business press, he said, and is then widely perceived as apolitical conventional wisdom. 

The recent "labor shortage" narrative appeared to arise right after the recent jobs report from the U.S. Chamber of Commerce, a massively influential pro-business lobby with one of the widest reaches of any political organization in the country. Within hours of the report's release, the Chamber released a statement arguing that "paying people not to work is dampening what should be a stronger jobs market" and announced a broad lobbying effort aimed at pressuring both the White House and Capitol Hill to kill jobless benefits. 

Republican lawmakers then jumped onto the bandwagon to trash unemployment insurance. "Systematically paying unemployment benefits that are more than a person makes working doesn't create an environment that's particularly conducive to going back to work," Sen. Pat Toomey of Pennsylvania — a distinctly moderate Republican by current standards — told Fox News in a Friday interview. Senate Minority Leader Mitch McConnell, R-Ky., also railed against the benefits, calling them a "special bonus for unemployed people to stay home."

But in fact this campaign against unemployment benefits can be traced at least as far back as last July, when the Chamber wrote a letter to then-President Trump urging what it called a "middle-ground approach" to federal assistance — which effectively amounted to a drastic reduction in benefits. "The additional $600 [in weekly benefits] is also causing significant distortions in the labor market and hurting the economic recovery," the group wrote at the time. "We routinely hear from our employer members who report that individuals are declining to return to work because they can take home more money on unemployment." 

Other conservative or pro-business organizations were also trying to build public sympathy for the struggles of employers.  Mere months after the pandemic had forced millions of Americans out of work, groups like the Heritage Foundation, the American Enterprise Institute and the Hoover Institute lamented that overly generous unemployment insurance was wreaking havoc on the labor market. As Rachel Greszler, a Heritage research fellow, put it: "Instead of bridging the gap, excessive unemployment payments will only increase the breadth and depth of the economic downturn."

This analysis then bled into the business press, with publications like Forbes and Business Observer publishing seemingly non-ideological stories about a scarcity of labor. Then it reached mainstream news, with a series of anecdotally-driven reports from the perspectives of disgruntled business owners in industries hit hard by the pandemic, including hospitality, construction, manufacturing, nursing, food service and more. 

Potential labor shortages, as Williams told Salon, have been a concern for the business community since the pandemic began, with employers "wondering how they're going to bring people back in these conditions." He continued, "The business community was already fighting this proxy battle months ago. The difference was, when these jobs numbers came out, they saw a perfect opportunity … to connect them to this broader lobbying effort and create an economic narrative that they know has a unique power in shaping policy."

Indeed, immediately after April's jobs numbers were released on May 7, business leaders vociferously hammered home this narrative. The National Owners Association, a group of McDonald's franchisees, wrote on May 10 about the "perverse effects of the current unemployment benefits" on hiring. Goldman Sachs chief economist Jan Hatzius echoed this theory the day, arguing that "labor supply appears to be tighter than the unemployment rate suggests, likely reflecting the impact of unusually generous unemployment benefits and lingering virus-related impediments to working," as Yahoo Finance reported. On the very day the numbers were released, the New York Post published an article featuring testimonials from New York City restaurateurs who blamed jobless benefits for their hiring challenges. 

The response of the business class was like a "lightning-flash reaction," said Joseph A. McCartin, executive director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University, in an interview with Salon. 

"Employers' associations and conservative groups have been seizing on the jobs numbers to campaign for the rollback of benefits in order to force workers back to work," he said, in hopes of regaining control over the labor supply and controlling wages. "There was a well-organized operation that's been in place for several months by groups who were preparing for the pushback. They knew they couldn't do it two months ago. They were ready for these numbers." 

Williams told Salon that the speedy response from Republican governors was best understood as a genuflection to their business constituencies. "Many of these Republican governors genuinely see themselves as serving the business community, above and beyond their constituents more broadly," he said. "They are willing to go out ahead of the evidence, and ahead of the political consensus, in order to demonstrate their fealty to the business community."

Unsurprisingly, many of the GOP governors who were quick to eliminate federal payments also have ties to pro-business organizations like the Chamber of Commerce. Just last year, the Chamber's chief public affairs officer sent several private emails to Georgia Gov. Brian Kemp and his aides, asking Kemp "to prioritize legal protections for businesses if workers or customers were to contract the coronavirus," as the Washington Post reported.

In April, the Cobb Chamber of Commerce, one the Chamber's local Georgia chapters, hosted an annual luncheon featuring Kemp, where he spoke about what he described as the misguided backlash surrounding Major League Baseball's decision to pull its All-Star Game from the state after the Republican-dominated Georgia legislature passed a now-notorious package of voting restrictions. He promised economic benefits "far beyond the value of any All-Star Game," stressing, "I will always fight for the business community."

Missouri Gov. Mike Parson has also been a loyal ally of his corporate constituencies. During the pandemic last year, Parson worked to advance legislation that would shield businesses against damages related to the spread of COVID-19. In May of last year, the Missouri Chamber of Commerce and Industry delivered "an urgent letter" to Parson asking him to "address the growing problem of opportunistic COVID-19 lawsuits." In July, Parson delivered a speech to the Springfield Area Chamber of Commerce touting the state's economic health prior to the outbreak. "Incomes have gone up. Taxes have gone down. We had at many times more jobs than we had people to fill them," he told the Chamber.  

South Carolina Gov. Henry McMaster, also a Republican gave several speeches to the state's Chamber of Congress and the Myrtle Beach Area Chamber of Congress, and received support from South Carolina's Small Business Chamber in September, when he recommended that the state use $30 million of coronavirus relief aid to provide grants to businesses that didn't qualify for PPP loans. 

Notably, the effort to eliminate federal benefits is being led out in the open for the public to see, instead of being astroturfed through pseudo-grassroots organizations. It's a lot like a "culture war," William Spriggs, a professor of economics at Howard University, told Salon in an interview.

"It is a purely ideological move" because "this is federal money," Spriggs explained, stressing that in the terms of pure economic self-interest, Republican politicians' decisions appear nonsensical. The federal money for jobless benefits "is not coming out of the state trust funds," he said. "From the local politicians, it's dumbfounding. The state of South Carolina is going to send half a billion dollars back to the United States Treasury" that would otherwise be spent in the state on rent, mortgages, groceries, gasoline and a host of other goods and services. "Don't they understand that?" he asked rhetorically. "You're going to take half a billion dollars of sales away from your companies?"

"In a case like this," Williams explained, "you're talking about a program that touches so many people that you need to change the public opinion first to win on it." Republicans and the business lobby, in other words, "want to change the prevailing political winds."

The "prevailing winds" at this point appear largely in favor of unemployment insurance, despite Republican protestations that, somehow or other, they're bad for the average worker. According to a poll from March, three-quarters of all Iowa residents — in a state dominated by Republicans — oppose cutting unemployment benefits. A Politico/Morning Consult similarly found in March that 72% of Americans supported President Biden's latest COVID relief bill, with a broad majority specifically supporting the latest batch of unemployment checks. 

In other words, it would require a truly impressive propaganda triumph for the GOP to change the minds of American workers, at least one-fourth of whom relied on unemployment insurance to survive throughout the pandemic. In seeking to accomplish that, Republicans are trying to link the unemployment issue "to the politics of reopening," Williams explained. "The goal is to use the media to try and create a national narrative that Biden is holding back the recovery."

By Jon Skolnik

Jon Skolnik was a former staff writer at Salon.

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Related Topics ------------------------------------------

Benefits Business Lobby Corporations Economy Jobs Labor Pandemic Reporting Unemployment U.s. Chamber Of Commerce