Kentucky Labor Force Lagging As Delta Variant Surges

Aug 5, 2021

Credit Creative Commons

Kentucky’s economy has largely weathered the coronavirus pandemic so far, though the number of people working is still far below pre-virus levels and the Delta variant threatens to cause more problems.

The state’s unemployment rate in June—the last month available—was 4.4%, far below the national rate of 5.9%.

But University of Kentucky economics professor Michael Clark says the unemployment rate doesn’t account for people who aren’t looking for work and have dropped out of the labor force.

And he says some workers still aren’t rejoining the labor force for a range of reasons like feeling unsafe at work, inability to get childcare and soon-to-expire enhanced unemployment benefits.

“We think a lot of this, again, will be temporary in nature because we think the labor force will start to come back to normal as COVID starts to go away,” Clark said.

Clark said there are several other reasons for the labor force decline, including an increase in retirements and people not being able to find the kind of jobs they want or are qualified for.

State lawmakers discussed the state of Kentucky’s economy, employment and inflation during a legislative meeting on Wednesday.

Kentucky’s labor force participation rate—the number of people actively working or looking for work compared to the total working-age population—has been consistently low for years.

But during the pandemic, the number of people who have dropped out of the labor force increased across the state and nation.

Clark said that’s led to a slight increase in average wages because some employers are trying to attract workers.

“Right now, we have a lot of demand for workers, but we don’t have as many workers available. So wage pressure has stayed up and we’re seeing that in the data, that wages continue to increase,” Clark said.

Republican politicians have blamed the labor shortage on enhanced unemployment benefits that are set to expire on September 6.

During the legislative meeting on Tuesday, Paducah Republican Sen. Danny Carroll said he’s heard stories about people not returning to work because of the benefits.

“There’s a lot of talk that is what has caused that labor market to decline and those jobs, simply because you make more money sitting at home,” Carroll said.

Clark said the unemployment benefits were among several factors affecting the workforce.

“It is likely that it contributes, but it’s difficult to say how much that contributes,” Clark said.

Democratic Gov. Andy Beshear created a “return to work” incentive last month, paying people $1,500 if they returned to work by the end of July.

Last week, Beshear called on people who haven’t been looking for work to rejoin the workforce before unemployment benefits expire.

“With a surging economy and job opportunities available throughout the commonwealth, there isn’t a valid reason why any Kentuckian who wants a job shouldn’t be able to find one,” Beshear said.

Meanwhile the state had a record $1.1 billion budget surplus this year, largely because revenues from sales and income taxes didn’t decrease as much as predicted during the pandemic.