Covid Made Labor Force Shrink by 500,000, Reason for Labor Shortage

Covid Made Labor Force Shrink by 500,000, Reason for Labor Shortage

  • A new paper finds that Covid-related illnesses made the labor force shrink by 500,000 people.
  • Many older workers who were out with with Covid chose to retire.
  • Covid-related absences also meant thousands in lost wages for workers, especially without sick leave.

After over a year of employers complaining that they just can’t find any workersa new paper offers one reason why it’s so hard to staff up: Getting sick with COVID-19 has knocked a whole lot of workers out of the labor force.

In fact, according to a National Bureau of Economic Research working paperCOVID-related illness made the US labor force shrink by around 500,000 people.

Authors Gopi Shah Goda and Evan J. Soltas used data on week-long absences from work from the Census Bureau’s monthly Current Population Survey, compared with state-level data on COVID-19 cases and deaths, and looked at the probability that workers would stay in the labor force after getting sick.

They find that, after calling out sick from work, workers are much less likely to participate in the labor force — which means they’re not actively working or looking for work. In fact workers who were out sick due to likely COVID-19 were 7% less likely to be in the labor force a year later compared to peers who didn’t call out sick.

A lot of the drop may be due to workers being pushed from illness into retirement. Workers under the age of 65 weren’t as likely to drop out of the labor force after having to call out sick — although their labor force participation did go down.

“Among workers age 65 to 85 with a health-related absence, approximately one in five exit the labor force around a year later due to that absence,” the authors write.

It’s another data point that reinforces why labor shortages may be here to stay, and what’s at their root cause: An economy (and life) altering pandemic. Labor force participation is still about 1% below its February 2020 levels, according to the latest data from the Bureau of Labor Statisticsand it’s remained persistently lower than pre-pandemic levels even as the country regains all of the jobs it lost during the pandemic. Workers were pushed out of the labor force by the pandemic’s sudden shock to childcare and mass layoffs, with some opting to just throw in the towel and retire.

But, importantly, illness itself had an effect on the labor market that, as the paper shows, is still being felt and calculated. The Brookings Institute previously found that around 1.6 million Americans might be missing from the workforce because of long COVID-19.

None of that is good news for workers. For the workers who had to call out sick, there was a big economic drag: An “average Covid-19 absence results in forgone earnings of at least $9,000,” according to the paper.

And even for workers who were potentially able to get back to work, lost earnings added up: A paper from the Urban Institute and funded by the Robert Wood Johnson Foundation found that unpaid absences during the pandemic cost workers $28 billion in wages, with the lowest-earning workers seeing the biggest losses. As of March 2021, just a third of the lowest 10% of earners had access to paid sick leave, according to the Bureau of Labor Statistics.

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