The extra $300 in weekly federal unemployment benefits is an easy political punching bag to use to explain away the hotel industry’s labor shortage problems. Want people back? Pay more and market the industry better.
Hotel leaders across the U.S. in recent weeks pointed to an extra $300 in weekly unemployment benefits, provided from a $1.9 trillion federal pandemic relief measure passed earlier this year, as the leading culprit for a labor shortage crisis heading into the summer.
Some early evidence suggests that argument isn’t bulletproof.
Twenty-six states are on track to end the added boost to unemployment insurance — set to expire at the federal level in early September — by next month. But several states that have already ended the measure aren’t seeing major swings in job search activity, according to data compiled by the job listing platform Indeed.
Economists and analysts point to a variety of factors, from the industry’s lower pay rates to poor messaging on career advancement as to why people may not be willing to get back into hospitality.
“The industry has never had a great reputation as an employer. There was a labor shortage problem before the pandemic,” said Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality. “The industry has never really been able to convey the proper message about opportunities within the industry, not just for the entry-level jobs but opportunities for careers. We haven’t been able to voice that message loud enough.”
Job search activity is below the national trend line in the 12 states that opted out earlier this month of the extra federal unemployment benefits, according to an Indeed report. Workforce development officials in Missouri, one of the first to drop the added benefits, told the New York Times they saw no meaningful increase in job applications across the state.
If the federal benefits were a leading source of the labor shortage crisis, as hotel executives like Hilton CEO Christopher Nassetta and many others suggested earlier this year, one would expect job search activity to be up in those states.
Searches are up, however, in the 13 states opting out of the benefits later this month and in early July. While nobody at Indeed was available for comment, the company’s report notes search activity briefly spiked in other states after they announced premature ends to the added benefits. But the spike did not hold.
While hotel executives, owners, and operators have largely blamed unemployment benefits on their hiring woes, economists have doubted this as the token factor in why so many jobs are empty while the hotel industry’s unemployment rate remains well above the national average.
The June jobs report, to be released Friday, will be the latest industry report card on how hotel job recruiting is going, but it will be hard to blame a disappointing jobs report simply on extra unemployment benefits when so many states are curtailing the practice.
Economists have pointed to lack of childcare, continued fear of catching the virus, and finding higher wages in other industries as to why hotel workers aren’t returning to their old jobs. The retail industry has a 17.5 percent, or $2.68 per hour, wage premium for frontline workers to hotels, according to CBRE.
“The extended [unemployment] benefits and all that may have a role, but I think it’s minor,” Graf said. “The competition with other industries that are paying better and offering better benefits and perks — I think that’s probably, together with the branding issue, the two main problems for the industry.”
Closed international borders also play a role in staffing shortages. Vacation markets like Cape Cod and Maine often rely on staffing hotels with H-2B and J-1 worker visas to bring in labor from foreign countries for the busiest parts of the year. The Trump administration severely curtailed these programs during its time in the White House.
While the Biden administration has ramped up the availability of these visas this summer, travel restrictions will likely limit how effective the program can be at filling available positions.
Not every hotel operator is blaming the labor shortage on the extra unemployment benefits and, instead, are trying to offset the more shallow pool of labor by wooing workers with signing bonuses and other incentives like summer housing.
“It’s going to be a longer issue than the easy response of saying employees will come back once the [extra federal unemployment benefits] go away,” Justin Grimes, managing director of the Kennebunkport Resort Collection in southern Maine, told Skift earlier this year. “Covid kicked some people out of the industry or gave people a chance to transition to a new industry, whether it was by necessity or they just realized this is not something they want to be doing anymore. I think what it’s really going to come down to is how to get more creative.”
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Photo credit: The hotel industry executive argument that extra unemployment benefits are keeping workers away isn't holding up in states that ended the program early. Daria Nepriakhina / StockSnap