SYRACUSE, N.Y. (WSYR-TV) — A labor economist who teaches at Syracuse University tells NewsChannel 9 that he thinks the federal unemployment bonus triggered by the coronavirus pandemic was a mistake.
The professor, Carl Schramm, says, “People like to lay complex explanations on economic phenomena, but sometimes simple ones will do. The simple one in this case is if you can make consistently more on an extended monthly basis for six months than you can make at work, it is the only rational decision is to take benefits.”
The phenomena he speaks of is the labor crisis currently hitting Central New York businesses.
Many industries, specifically restaurants, have several open jobs but very few applicants.
Schramm agrees with many restaurant owners that they have to compete with unemployment and many in the work pool are satisfied staying home on unemployment.
Each week, a person on unemployment can be paid up to $500 from New York State and because of the recent passage of the American Rescue Plan, $300 additional from the federal government.
In April, the owner of Bull & Bear Roadhouse raised wages paid to his back-of-house staff by $4 per hour to directly compete with the amount being offered by unemployment.
Mark Bullis, who owns three locations in DeWitt, Fayetteville and Clay, says the bonus will last as long as unemployment does and may continue in some form after. So far, it hasn’t resulted in the surge of applications he expected.
Opinion articles written on CNN.com and for the New York Times argue that the unemployment benefits inspire companies to raise wages, but the SU economist worries that results in higher prices shifted to the consumer.
The articles argue that big corporations can afford to pay more, but small businesses can’t as easily and they have to then compete with chain restaurants with more cash flow and support from parent companies.
“People like to sweep that aside because it is suggestive that government made a mistake,” says Schramm. “Sometimes government makes mistakes and I think this is largely one of them.”
Instead of setting the same amount in bonus unemployment nationwide, $300 now extended to September, Schramm wishes the federal government customized the rate per region to better match an average salary.
What’s fair in San Francisco or New York City might be overly generous for Central New York’s lower cost of living.
Schramm says, “They should have been adjusted to be cut back as the labor market comes forward as the economy comes back, as the demand for labor grows.”
It will result in rising costs in multiple industries, as factories closed by the pandemic reopen and work to catch up and as people stay on unemployment and companies pay more to encourage return to work.
People should expect to pay more in restaurants, for real estate, and for groceries.
“Corn syrup is in everything,” says Schramm. “There has been a huge inflation of corn and corn futures. That will all be reflected in the price of cereal, soups, soft drinks. That’s coming down the road. They’re all related.”