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Work, Wages and Welfare

Work, Wages and Welfare

Renee Shaw and guests discuss work, wages and welfare. Scheduled guests: Aaron Yelowitz, Ph.D., economics professor at the University of Kentucky; Dustin Pugel, policy director at the Kentucky Center for Economic Policy; Charles Aull, executive director at the Center for Policy and Research at the Kentucky Chamber of Commerce; and Peter Fosl, Ph.D., philosophy professor at Transylvania University
Season 29 Episode 28 Length 56:33 Premiere: 07/25/22

Economists Debate the Causes Behind an Uncertain Economy, Discuss Possible Remedies

When the COVID-19 pandemic brought the world to a virtual standstill in 2020, national and global economic activity contracted to levels not seen in decades.

The rebound has been nearly as dramatic with a surging economy, strong demand for consumer goods, wages increasing, and unemployment hitting record lows.

“We are in the middle of a really historic recovery,” says Dustin Pugel, policy director at the Kentucky Center for Economic Policy. “The COVID downturn was deeper than any downturn we’ve seen since the Great Depression, and we’re on track to recover fully probably in about half the amount of time it took us to recover from the great recession.”

But the financial roller coaster of the past two years has delivered another whammy as prices for gas, food, and other critical items soared. People who managed to score a pay raise during the recovery found their pocketbooks pinched yet again.

“Although worker’s wages in nominal terms are rising at a rate that seems pretty good, then inflation is eroding purchasing power,” says University of Kentucky Economics Professor Aaron Yelowitz.

As inflation hit a 40-year high this spring, economists, policy experts, and politicians scrambled to explain the causes and predict whether a continued escalation in consumer prices would lead to a recession.

“The unfortunate temptation has been for many people to oversimplify the causes of inflation,” says Peter Fosl, philosophy professor at Transylvania University who studies the intersection of philosophy, politics, and economics.

Fosl blames inflation on high energy prices, supply chain disruptions, a tight labor market, government stimulus spending, Federal Reserve monetary policy, and corporations spiking prices in a bid to recover the losses they took in the early months of the pandemic. He says in the first quarter of 2022 alone, S&P 500 companies posted profits of nearly 13 percent.

“We know that these large companies are, you could say, gouging if you want to be tendentious, but they’re reaping enormous profits,” he says.

But big business doesn’t deserve to be blamed for inflation, according to Charles Aull, executive director of the Center for Policy and Research at the Kentucky Chamber of Commerce. He contends it would take enormous corporate profits to drive inflation rates being seen in countries across the globe.

“When you’re trying to understand inflation, I think it’s important to stick with those core basics of thinking about supply and demand,” says Aull.

When COVID hit, consumers diverted their spending from services to purchasing goods at the same time as manufacturers around the world slashed their output when factories shuttered to slow the spread of the coronavirus. Supply chain disruptions made it even harder to deliver highly sought goods to buyers. The war in Ukraine complicated matters further, interrupting supplies of oil, natural gas, corn, and wheat coming from and through that region.

Making Sense of the Labor Market

The labor shortage is also affecting employers from manufacturing to retail to hospitality. Although unemployment claims are starting to tick upwards, the unemployment rate remains low at 3.7 percent in Kentucky as of June, and 3.6 percent for the nation as a whole.

The available labor pool continues to be an issue for Kentucky employers. The state ranks 49th in workforce participation and has some 200,000 open jobs.

Conservatives have argued that overly generous unemployment payments and welfare benefits have encouraged people to stay home and collect government checks. Pugel argues other factors were at play. He says the pandemic brought a wave of early retirements among workers aged 55 and older. He also says the mothers of young children left the workforce at record levels over family and child care issues.

“Child care before pandemic was extremely hard to find and even harder to afford,” says Pugel. “That hasn’t really changed since then, so there is a large number of folks who are still at home caring for their kids.”

Pay is another issue. Yelowitz says even in parts of Kentucky with low costs of living, employers are having trouble finding entry-level workers without paying them $12 to $14 an hour — far above the state’s minimum wage of $7.25. Pugel adds that about a quarter of workers in the commonwealth still earn less than $15 an hour.

Some employers are offering better benefits in hopes of filling open jobs and keeping the employees they already have.

“Fearing the loss of talent is a good reason to have a compensation package that aligns well with your workers,” says Yelowitz.

With the tight labor market, employees are finding themselves in a better position to bargain with their employers over pay, benefits, and working conditions. It’s also brought an increased interest in union activity. Fosl says a trend that started with unionizing efforts within Amazon, Starbucks, and other companies could continue.

“Union membership is very low, but I say stay tuned because these are conditions that are ripe for growing labor,” says Fosl.

Even if workers do organize, Aull says that’s no guarantee they’ll get the pay and benefits they want. He says businesses must still be able to afford those compensation packages.

“Employers desperately need to keep those employees,” says Aull. “They want to provide robust benefit packages, they want to provide competitive wages, they want to provide that flexibility that workers are looking for. It’s all about do the dollars and cents add up?”

Mandating higher state or federal minimum wages, or negotiating company-wide benefits packages can create other challenges for businesses, according to Yelowitz.

“These one-size-fits-all policies where, essentially, we’re imposing that all employers have the same sort of compensation package... is ill advised,” he says. “If economic conditions decline, it makes it far harder to adjust to those sorts of conditions, making a recession longer than it otherwise would be.”

Changes to Social Safety Net Programs

Changes enacted by the 2022 General Assembly will impact unemployment insurance and other public assistance benefits available to Kentuckians.

Senate Joint Resolution 150 ended the pandemic state of emergency declared by Gov. Andy Beshear in early 2020. Congress had allowed Kentucky and other states with emergency declarations to offer greater Supplemental Nutrition Assistance Program payments to low-income individuals.

Now without that declaration, Pugel says SNAP benefits for Kentuckians dropped an average of $100 per person. Taken as a whole, he says the state will lose about $40 to $50 million in spending that is crucial to families and local businesses.

“It is a pandemic-era support, but it was a very real support and I think people are feeling that loss,” says Pugel

Lawmakers also tightened eligibility requirements on unemployment benefits, Medicaid, and other programs. Aull says that in a state that has so many people on taxpayer-funded public assistance, it’s important to weed out fraud and ensure that those programs help only those who truly needed it.

“It’s very reasonable to take a deep dive into those issues and to try to dissect why do we have such high rates of government transfer, why do we have so many people that are dependent on benefits and see if there is anything structural at play that the legislature can address,” says Aull.

Opponents of these changes say that intentional fraud within SNAP and Medicaid is very low. Pugel says that any new requirements on those beneficiaries will harm their ability to feed their families, pay their bills, and see a doctor.

State lawmakers also created a Benefits Cliff Task Force to examine the problem of how small increases in personal income can result in a substantial drop in an individual’s welfare benefits. The problem impacts people who depend on public assistance as well as companies that want to offer pay raises but fear they may lose workers if they do.

“If you got a full-time job at a fairly low wage, you’re actually not really better off than you would be than if you had earned essentially zero income because we start to claw back these benefits,” says Yelowitz. “Those tend to create fairly dramatic work disincentives and makes people fearful of being on the wrong side of the cliff.”

The task force held its first meeting in mid-July and a second meeting is scheduled for late August.

With new economic numbers showing that G.D.P. shrank for a second straight quarter, and the threat of a serious economic downturn looming, Pugel says it will be critical for Americans to have ready access to public assistance benefits.

“There’s a real benefit to having a robust set of supports for folks, especially as we head into what may or may not be a recession,” he says. “It’s important to make sure that these programs are accessible to folks, that they’re easy to apply for, and that it’s easy to maintain your eligibility.”

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Season 29 Episodes

School Safety: Debating State Policies

S29 E29 Length 56:33 Premiere Date 08/01/22

Work, Wages and Welfare

S29 E28 Length 56:33 Premiere Date 07/25/22

50 Years of Title IX

S29 E26 Length 56:33 Premiere Date 07/18/22

The Impact of U.S. Supreme Court Decisions

S29 E24 Length 56:33 Premiere Date 07/11/22

Kentucky's Ban on Abortion

S29 E23 Length 56:34 Premiere Date 06/27/22

Discussing New Developments in the COVID-19 Pandemic

S29 E22 Length 56:33 Premiere Date 06/20/22

Reducing Opioid Addiction Rates in Kentucky

S29 E21 Length 56:36 Premiere Date 06/13/22

Mass Shootings and Gun Laws

S29 E20 Length 56:33 Premiere Date 06/06/22

Discussing the Rise in Gas Prices and Inflation

S29 E19 Length 56:34 Premiere Date 05/23/22

Previewing Kentucky's 2022 Primary Election

S29 E18 Length 56:33 Premiere Date 05/16/22

Third Congressional District Democratic Primary

S29 E17 Length 56:33 Premiere Date 05/09/22

Candidates in the 2022 Primary Election: Part Two

S29 E16 Length 58:33 Premiere Date 05/02/22

Candidates in the 2022 Primary Election: Part One

S29 E15 Length 58:40 Premiere Date 04/25/22

Lawmakers Review the 2022 General Assembly

S29 E14 Length 56:33 Premiere Date 04/18/22

Recap of the 2022 Legislative Session

S29 E13 Length 56:35 Premiere Date 04/11/22

Public Assistance and Jobless Benefits

S29 E12 Length 56:33 Premiere Date 03/28/22

Abortion Legislation in the 2022 General Assembly

S29 E11 Length 56:34 Premiere Date 03/21/22

State Budget, Taxes, and Other 2022 General Assembly Topics

S29 E10 Length 57:42 Premiere Date 03/14/22

Critical Race Theory and Approaches to Teaching History

S29 E9 Length 56:33 Premiere Date 02/28/22

2022 Legislative Session at the Midpoint

S29 E8 Length 56:33 Premiere Date 02/21/22

Name, Image and Likeness Compensation

S29 E7 Length 56:33 Premiere Date 02/14/22

Child Abuse and Neglect

S29 E6 Length 56:33 Premiere Date 02/07/22

Debating School Choice in Kentucky

S29 E5 Length 56:35 Premiere Date 02/01/22

Debating Provisions in the Proposed State Budget

S29 E4 Length 56:34 Premiere Date 01/24/22

Redistricting, State Budget, and Other Legislative Issues

S29 E3 Length 56:33 Premiere Date 01/10/22

Discussing Legislative Goals for the 2022 General Assembly

S29 E2 Length 56:33 Premiere Date 01/03/22

Previewing the 2022 Kentucky General Assembly

S29 E1 Length 56:35 Premiere Date 12/06/21

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Kentucky Tonight, hosted by Renee Shaw, is a public affairs discussion program broadcasted live on Monday nights at 8/7c on KET and KET.org/live.

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