- There is a shortage of more than two million workers in the US labor force, according to Bank of America Institute.
- One of the ways people might pay their bills even if they’re not working is by saving too much.
- According to economist Anna Zhou, having a “financial buffer” could be a temporary reason why they are out of the labor force.
Have you ever wondered how all those people who quit their jobs during the Great Resignation – especially those who left the workforce altogether – are doing?
They can thank concert work, live with others earning money, and excess savings or stimulus funds during the pandemic.
That’s according to a conversation with Anna Zhou, an economist at the Bank of America Institute and author of a recent report who noted that more than two million American workers are “absent” from the labor force compared to the pre-pandemic participation trend based on data from the Bureau of Labor Statistics.
“There’s not a single factor that’s really stopping people from getting back into the workforce,” Zhou told Insider.
Instead, his research indicates care duties, early retirementAnd ongoing health issues related to COVID among the reasons why people are absent from the workforce. But most Americans can’t afford to simply quit their jobs and still manage to pay the bills, especially in a time of historic crisis. inflation. We spoke with Zhou to figure out how all these people absent from the workforce make it work.
Below are various ways that these “absent workers” from the labor force can still pay their expenses and pay their bills.
A combination of saving money and moving to cheaper places
According to Zhou and the report, one of the reasons people who left the labor force may not have returned is that “many people have migrated to states where the cost of living might be lower than big cities,” Zhou said. The founder of the startup Haider Ejaz, for example, has already told Insider that he moved from San Francisco to Portland, Oregon, in 2021 partly because of the cost of living.
People may also still have savings from stimulus payments, given “there has been tremendous fiscal support in recent years,” Zhou said. By mid-January, people had used just over a third of the extra savings they had built up during the pandemic, according to a the wall street journal article quoting Goldman Sachs. However, that will increase to around two-thirds by the end of 2023 according to the article.
Zhou said based on the median bank balances of Bank of America customers that “what we’re seeing across income cohorts, that balance has been reduced from last year’s peak, similar to the surge in inflation, but the levels are still very high compared to where they were in 2019.”
“So that suggests that they still have that excess savings that they’re able to draw down and also that combined with migrating to places where the cost of living is lower, I think on the one hand that allows them to work less or not at all,” Zhou said.
However, the personal savings rate has come down from its pandemic-era highs. And according to a Bank Rate Survey, 39% of American adults have less emergency savings than a year ago. Some people don’t, according to the survey.
The “financial buffer” that some of these missing workers can count on could be a “temporary reason” for their departure. Other reasons, however, may not be so temporary. Zhou said the health crisis, affordability of childcare and wanting to do on-demand work instead of desk work “are less likely to reverse in the short term.”
“That means this labor shortage issue is likely to be a bit more persistent than we would like it to be,” Zhou said.
The flexible lifestyle offered by gig work has changed the way many people work
Zhou said Bank of America customer data shows that for those who have earned gig income, “that number has increased very sharply during the pandemic.”
“The potential theory could be that some people work on demand for, say, two months and then take a three-month break,” Zhou said. “And during those three months, they will not be counted in the labor force.”
But because of the time they’ve worked doing gigs, they have money to fall back on, according to Zhou.
According to an August 2021 survey noted in a Pew Research Center post, almost a third concert platform workers who made money on the platforms in the past 12 months said it was their main job. Overall, whether it’s a main job or a side job, 23% said their gig platform money was “essential” and 35% said it was ” important” to meet their basic needs.
According reporting by Jordan Hart of Insiderconstruction worker Matthew Hill tried factory work, but then wanted the flexibility to decide his schedule.
“When I’m able to decide what I want to do with my time, there are things I can do to help me learn and grow my own business,” said Hill, who is an Uber driver, delivery driver DoorDash and content creator. “There are different opportunities that I can come across because I am always looking for investments to make.”
Multi-generational or shared living allows people to share bills and care tasks to earn less
Zhou said these workers missing from the labor force could potentially belong to a multi-income household, noting that many young people have returned to their parents during the pandemic. “Because wage inflation over the past year has been very high, they may be able to offset the cost they incur for their families,” Zhou said.
Even before the pandemic, there had been an increase in the number of adults living with other adults, according to a 2018 article by Richard Fry of the Pew Research Center.
“While the increase in cohabitation during and immediately after the recession has been largely attributed to an increasing number of millennials returning to live with their parents, the longer-term increase has been partly due to a different phenomenon: parents moving in with their adult children,” Fry wrote.
Although this post is from before the pandemic, a LendingTree A survey shows that some Gen Z and Millennial adults have returned to their parents during the pandemic and have been able to pay off their debt, among other financial benefits for themselves.
As an insider Jacob Zinkula reported, a December PropertyManagement.com survey of millennials found that “1 in 4 millennials currently live with their parents” according to a post on the to place. One of the benefits of living in a multi-income household could be that you also save on rent instead of being hit with a “singles tax” on housing.