The New Workforce with Alicia Modestino

Is there really a shortage of workers? How has the pandemic changed our approach to work? What does the new workforce look like and how can employers — especially not-for-profits — adjust. Dr Alicia Modestino will join us to share her observations on the state of the workforce and how the pandemic is changing it.


CTMM Intro  0:02 

Pieta Blakely  0:28 

Morning. So, is there really a shortage of workers? How has the pandemic changed workers’ attitudes to employment? And what does the new workforce look like? How can employers, especially not for profits, adjust? Today, we’re continuing our conversation about the new world of work. This is Coffee Time with Masterminds, a 30-minute conversation with leaders of mission-based organizations. I’m Pieta Blakely, and I am the founder and principal of Blakely Consulting. If you’re joining us today, please introduce yourself in the chat and let us know where you’re joining from. My co-host, Cynthia Rojas is with me today. Cynthia is the founder and principal of To Your Growth. Good morning, Cynthia.

Cynthia Rojas  1:12 

Hi, Pieta. How are you?

Pieta Blakely  1:14 

I’m grea, thank you. Today, Dr. Alicia Modestino who is an associate professor at Northeastern University, is joining us. She’s a professor in the School of Public Policy and Urban Affairs, and in the Department of Economics. She was previously a senior economist at the Federal Reserve Bank of Boston. And she joins us today to share her observations on the state of the workforce and how the pandemic is changing it. Good morning, Alicia. Thanks for joining us.

Alicia Modestino  1:42 

Hi, Pieta. Thanks for having me.

Cynthia Rojas  1:44 

Good morning, Alicia. We’re so excited to have you on.

Alicia Modestino  1:48 

Good morning, Cynthia. It’s great to be here.

Pieta Blakely  1:50 

So, what are you seeing? What do you think are the big themes?

Alicia Modestino  1:54 

Well, let me start off just giving you a little bit of a breakdown of the latest jobs report, which came out right before Labor Day. And what we saw was a mixture of I would say good and bad news. So first, the bad news was the spread of the Delta variant really slowed economic activity and hiring. So, employers added 235,000 jobs during the month of August, which sounds great, but actually was one of the weakest jobs reports of the past year. In comparison, we had seen gains of over a million jobs in June and July. And then we’re still down 5.2 million jobs since the start of the pandemic in February 2020. So, we are still not out of the woods yet.

And we saw this particularly in industries where low wage workers still struggle with most apparent slowdown in employment in lower paid industries, where employers deal with customers face to face. So, things like restaurants, bars, stores, and hotels, leisure and hospitality. And this is in part likely driven by you know, some people staying home to prevent the spread of the virus. As we’ve seen in the past, you don’t even need any official shutdown to have economic activity drop. People just take matters into their own hands. But even though the report was very disappointing, there were some bright spots. So, the unemployment rate did dip to 5.2%, although there’s still a lot of disparity by education and race. Teens we’re having a great summer. So, if you were a teenager or the parent of a teenager, it was probably one of the best summers for them to be finding a job in years. And we did see a boost in terms of hourly earnings compared to a year ago, which is something very new that we haven’t seen wages going up in a while. And employers across the board are really improving working conditions like creating more flexible shifts to accommodate childcare, providing more opportunities for advancement and acknowledging the need for wellbeing to alleviate burnout.

Pieta Blakely  3:53 

So, when you say that unemployment has decreased, do you think that is because some workers are just out of the labor force entirely?

Alicia Modestino  4:02 

Yeah, so it’s definitely a mixture of people getting jobs as well as people dropping out of the labor market. So that’s always a tricky number to be watching, particularly during a recovery because if people get discouraged and just drop out, that’s not really the way you want to be improving the unemployment rate. And certainly, that’s some of what we saw in that jobs report that came out right before Labor Day. Particularly, there’s a drop in the labor force participation for women. It was small, but we also saw a small drop in labor force participation last year in August.

That then was followed by nearly a million women dropping out the labor force in September. And probably anyone who has young children in school can imagine what happens in September is that everyone goes back to trying to balance work and family in a very structured way and last year, with so much remote and hybrid learning, a lot of the time care and making sure that kids got through their school day, whether it was in person or remote fell on women. So, that was one of the reasons why we saw so many women dropping out of the labor market last September.

We’re a little concerned that that might be happening again this September, because even though schools are largely in person, there’s a lot of disruption. I’ve even experienced in my family where if your elementary school kid gets a sniffle, or if they’ve been exposed to a classmate who has COVID, then you’re not going to be attending school in person until you can produce a negative COVID test, which can take a few days up to a week. And then you have to be figuring out work and childcare in the middle of that.

Pieta Blakely  5:41 

Yeah, I mean, I think that’s huge when you say a million women just left the workforce. And there are still a lot of barriers to them coming back.

Alicia Modestino  5:51 

Yeah, we’re actually seeing a kind of a second wave, I would say, of women dropping out of the labor market. So, when the pandemic first hit, we saw a lot of women dropping out, particularly those that had in-person jobs that were face to face. And a lot of that stemmed from, in part, the industries they were in, but also the lack of childcare. So,  if you have an in-person job, and you don’t have any childcare, there’s really no good option. You are pushed out of the labor market. It wasn’t women choosing to leave the labor market. Your choices are leave your kid at home alone or not go to work. But now we’re seeing sort of a second wave, because for a lot of last year, women, at least in higher paying jobs or you know, sort of jobs in the knowledge sector, were able to stay home and they weren’t expected to be in-person. But now we’re seeing more and more companies expecting some in-person interaction. Whether that at this point is voluntary or sporadic or back in the office every day, that is putting more of a constraint on what women can do when they have previously been working from home.

Pieta Blakely  6:59 

And some people have said that unemployment benefits are keeping workers from coming back to work. What do you think about that?

Alicia Modestino  7:11 

Well, it’s an interesting theory, but it doesn’t turn to be panning. It’s not really panning out in terms of the data. So,  you know, in theory, obviously, if you have unemployment benefits, and that does give you some breathing room while you’re looking for a job, and that’s what they’re designed for. They’re actually made so that you can look for a good job match – a job that provides you with either the income or the schedule, or the career trajectory that you’re looking for. And that’s part of the reason why we have unemployment benefits that last 26 weeks or half of the year in duration, and then were extended during the pandemic, to give people that support that they needed, while they were able to be looking for a job, particularly during a time that’s so disruptive right now, where loss of in person service jobs just have not come back.

And so, those are folks who might need to retrain or look for a career in a different area. And so, what we saw during the summer was that 26 states turned off those extra unemployment benefits early before they needed to. So, they all expired right before Labor Day this year. But 26 states ended them in June in July. And so, that gave us a little bit of a natural experiment about what we might see in terms of impacts.

And there was a study that came out actually from UMass Amherst with a few other co-authors from other universities that showed that of the people who lost their unemployment benefits, only one out of eight was able to find a job in the month or two after losing those benefits, and that the benefits for every dollar in benefits that was lost, there was only seven cents in wages that were gained. And that was largely because the people who came off of the benefits didn’t find a job. And so, you know, for some people, maybe it was holding them back from jumping into the labor market right away, but it just shows that really, by and large, that just was not true.

Pieta Blakely  9:07 

So, it’s not unemployment that’s keeping people out of work, but in most cases, the jobs aren’t there. There’s another interesting thing that we’ve seen, which is higher paid workers who I think have reprioritized, have done some soul searching and are changing career paths, or moving to different states, are pursuing different careers. You know, to some extent do you think that unemployment benefits let other types of workers have that luxury?

Alicia Modestino  9:43 

Yeah, absolutely. When you think about the stories we hear with the great resignation of people, you know, moving across the country to finally live in, I don’t know, some beautiful area of Montana, whatever their dream was, you know, if they could take their job with them – they did – so they could continue to work remotely for Google or other places. A lot of people did that. Or, those are, you know, workers who are in high demand and have lots of options and so, they were able to move from one job to another pretty seamlessly, while reprioritizing where they wanted to be either geographically or professionally. And that’s exactly right, that unemployment benefits really give lower paid workers, the opportunity to be able to do that same thing, when they don’t have the benefit of being able to move job to job.

So, we had a lot of people who were thrown out of not just, you know, the leisure and hospitality industry and the food service industry, but the childcare industry, the healthcare industry even. If you weren’t an essential healthcare worker, there’s a lot of smaller healthcare practices that went out of business. So, there’s a lot of displacement right now, those workers and a lot of them are trying to rethink what their next steps are, in part, because they can’t go back to what they were doing. Those jobs aren’t there. So, they need to retrain for something. And those unemployment benefits, give them a way to tap into that great resignation phenomenon that’s happening with workers who are in higher wage or, you know, more highly educated jobs.

Cynthia Rojas  11:18 

I have a question, Alicia, you, you talked about how a lot of these fun facing jobs are not around even in the hospitality, industry. But almost every restaurant that I go to, has a sign that says, “Please be patient. We can’t find help,” or something to that nature, “and the people who are here chose to be here.” Why am I hearing a different story? Not just me. We’re hearing a different story, but the data is also saying that those jobs have also gone away.

Alicia Modestino  12:01 

So, not every restaurant came back, right? So, let’s remember that. So, a lot of restaurants went out of business during the pandemic. We can think of even some iconic restaurants in whatever area of the country that you’re at. Particularly in Boston, we saw a lot of restaurants go out of business, particularly over the winter of 2020, when we couldn’t do any more outdoor dining, and those restaurants, maybe couldn’t survive off of just takeout. Not every restaurant came back.

So, we have a problem here where the restaurants that are left are oversubscribed. And they are hiring workers, but they can’t fill in to hire for all of the all the jobs that were lost. The other thing that’s happening, though, is kind of what I was saying in terms of workers being able to rethink what it is that they want to be able to do. And so, for a long time, we saw that these jobs can be filled, for example, in restaurants, because they were offering the same low wage, kind of not very flexibly scheduled, not great working condition type of job.

 So, imagine you had been waitstaff before the pandemic. And now, you’d be going back to the same wage. You’d be having greater exposure to the public, a less set schedule than you had in the past. And you have to deal with customers who maybe aren’t being on their best behaviour. That doesn’t look like a very attractive job. And so, you might take advantage of the unemployment benefits that you have been given to go retrain for a different job, we’re definitely seeing that. You might hold out for better wages, or a restaurant that has better working conditions than the one that you’ve seen.

And so, it took a little while over the summer for employers to realize that people weren’t going to come back to the same low wage, low paying job that you had before. And so, we did see them start raising wages. We’ve seen that in a number of industries and a number of parts of the country. And then we also saw those same employer scrambling for workers they might not usually hire in the past. And so, that’s where teenagers come into play. So, a lot of these waitstaff jobs really used to be jobs that would be filled by teenagers, particularly the seasonal jobs, for example, on Cape Cod and Massachusetts.

And over time, adults have been taking those jobs, because they were the kinds of jobs that they, you know, just needed to be able to hold at the time. And so, when those adult workers weren’t willing to come back to the low paying jobs, and were looking around for something better employers or somebody had to turn to teenagers to fill those jobs. So, that’s where we have this paradox.

We have some jobs going unfilled. We have other people who are still looking around for a job and there’s a little bit of this mismatch until we either make those jobs better jobs or we can get those unemployed people into other sectors.

Cynthia Rojas  14:54 

That was my suspicion all along – this idea that people are on the couch, watching Netflix just didn’t feel right. And that’s the sentiment that I hear over and over again. Another thing that’s happening is that we, as consumers, have increasingly grown impatient, and there’s a lot more yelling, that I see there’s a lot more disrespecting of workers. I see it in the airlines. I mean, this is probably the worst time to be a flight attendant, because they get it all the time. I can’t get on an airplane without seeing a fight or not a fight, but an argument about masks; something that I can’t believe we’re still having a conversation about, almost two years in. And so, that’s another thing that I’m seeing that is not encouraging. It’s just what you said. It’s not encouraging people to come back to work, especially when people have become more hostile.

Pieta Blakely  15:58 

I think that has stability also has to do with everybody is traumatized. We are all, you know, as a country, not fully okay.

Cynthia Rojas  16:09 

Yeah. I have a theory. I haven’t pulled it, but early in the pandemic, I heard a lot of people say, “I don’t know anybody who has had the virus.” Well, a year and a half in. I very rarely hear anyone say that anymore. Almost all of us know someone who has gotten the virus. Many of us know someone who has died. And so, the fear factor, I think has gone up. That’s another theory that I have where people aren’t coming to front facing jobs, because they just don’t want the exposure.

Pieta Blakely  16:51 

it doesn’t, I mean, everybody has their own particular risk tolerance. But that risk wasn’t factored in the first time they took that job.

Cynthia Rojas  16:59 

Right. Right. Yeah.

Alicia Modestino  17:01 

Well, and also it also coincides with the other personal circumstances that you’re under in terms of, Do you have an underlying health condition? Do you also take care of a vulnerable member of your family? So, all of those things, like Pieta said, they weren’t factored in when you first had that job before the pandemic. I think the other thing that we’re seeing is just this clash of two trends that are going on at the same time. One is pent up demand for all this stuff that we couldn’t do when the pandemic first hits. So, going out to a restaurant, traveling, going to a hotel, going to an amusement park, going to a concert. All of those things are things that we have pent up demand for.

We are just dying to get back to normal and have some fun. At the same time, we are also seeing that people have been traumatized, and so, re-entering into those public places is not necessarily the easiest thing for everyone. And particularly if you are on the working side of it, right? So, we see this all the time when you were mentioning the mask wearing, Cynthia wear for a retail establishment people are like, “What’s the big deal? I didn’t wear my mask going into the store one time.” Yeah, but that worker is seeing 100 customers in the day, right? And they’ll be exposed to 100 people without a mask. It’s not one time. And so, you know, there’s a lot of hesitancy to go back to those kinds of jobs that, you know, they’re low paying to start with, they don’t have benefits. You don’t have a set schedule. You might not have childcare for and they might expose you to the virus, and they’re certainly going to expose you to not the best behavior that we’ve seen.

Pieta Blakely  18:41 

And like you said, it’s not just exposing you to the virus. It’s also your kids. Young kids aren’t vaccinated. It could be your parents and grandparents and other people that you have responsibility for.

Alicia Modestino  18:57 

Yeah, just to give you a sense of the scale of the parenting thing, too. We did a survey of 2500 working parents during May and June of 2020. So, not this summer, but the previous summer when we were kind of at the height of the pandemic. And we found that almost 20% of parents had either lost a job or reduced their hours solely because of childcare. Like we gave them all sorts of other reasons. They can pick like, you know, my company went out of business I got furloughed or something like that. This was solely because of childcare. And among the women in our sample who became unemployed, one in four of them said they became unemployed because of a lack of childcare.

So, you know, childcare is really an issue that hasn’t gone away. And I think that’s something – if you don’t have a child under the age of 12 – you might not be feeling this, but as the mom of a nine year-old, I can tell you, we don’t go indoor dining. We don’t go to stores without a mask on. We really think very carefully about places that we get exposed to and which events we can go to and balance that with sort of the needs of our kids, and we’re doing these mental gymnastics for, like 18 months now. Aand it does make me worry about what we will see in terms of the jobs numbers in September. You know what came out in September, because I do think for a lot of parents, it’s been a marathon and we are tired. So, a lot of people will just throw up their hands and say, “I’m out.”

Cynthia Rojas  20:23 

Oh, yeah. Oh, yeah. I also learned from a mortgage company, that part of the real estate boom is also families coming together and purchasing bigger homes, and they’re moving in together for a variety of reasons; but people also need home offices. So, this idea of you – and I’m repeating what you’re saying, but you probably have vulnerable people at home, that you now have to think about, where so I may feel safe, bBut my mom takes care of her parents. And so, I have to think of my mom. But I also have to think about my very, very elderly grandparents. So, there are all these other people I have to think about now, where I didn’t before. I would visit them and everything was fine.

Pieta Blakely  21:15 

I think this comment that we have up on the screen right now is so interesting. “Privilege, proximity and social determinants of health.” You know, so many of these issues are intersecting here.

Alicia Modestino  21:26 

And it really affects the economy in the labor market. But I think something that economists have been saying for a long time, but maybe policymakers don’t always hear very readily, is that the virus drives the economy. You don’t even need to put a shutdown in place. People will stop going to restaurants and stop a lot of their economic activity when they see the virus in their community. And that’s something that Cynthia brought up before where, you know, Boston, New York, Seattle… places that got hit hard, early, shut down hard and early, and saw huge economic impacts compared to other parts of the country. And now we’re seeing the reverse, right, because the vaccination rates are high in those places that got hit first, because we saw it. We saw the impacts on people’s lives and their economic well-being. And now we’re seeing that in other parts of the country. So, these two things are intertwined and it also, you know, then drives people’s decisions about where they work, how they work, who they want to work with.

Cynthia Rojas  22:31 

So y, I know you’re not a fortune teller. At least that wasn’t in your bio, but I have to ask, because I don’t think any of this is going to change anytime soon. Meaning, I think this is our way of existing for a long time. This virus, we’re wearing masks, being afraid, the ups and downs of the hikes. What do you think will be a longer term impact maybe to next summer? What should we be expecting in terms of unemployment, in terms of the employment shortage, the resignation? What are your thoughts?

Alicia Modestino  23:11 

I think we’ve seen a lot of those shifts already taking place in terms of the great resignation, you know, people making sort of these occupation changes, or moving across the country. I think a lot of that has already played out. Some of that will still continue. I do think there are some bright spots ahead, though. I think, you know, Pfizer has submitted their data to the FDA to get approval for kids 5 to 12, to be vaccinated. I have some pretty low expectations, that Halloween deadline that kids getting shots into arms, I don’t think that’s going to happen. But I do think my daughter will be vaccinated by say, January, okay. Which then means that I will certainly feel much better about going places, myself or with her, going back and resuming a lot more of our activities. And so, we should see a bump up in economic growth from that alone and a return to a bit of normalcy. I do think the virus is mutating, you know, every day, and there are many more letters in the Greek alphabet beyond delta.

And so, we will see other mutations. We will need booster shots. But if we can get most people vaccinated with a first round of shot, we know that we won’t see severe illness and we won’t see hospitalization. We can take some of the fear out of the equation, and then see it more as disruption and, you know, illness that’s maybe similar to the flu. But I do think we will have masks. I think masks probably are something we should have been doing before the pandemic frankly. A lot of my Asian students when they are sick on campus, they wear masks when they’re walking around. It’s a great idea that we should have been doing before. I do think that working from home is not going to go away. I think that companies realize that when they didn’t get people back in the office this summer and they push it to the fall now they’re pushing it more towards January, it’s gone on just too long. So, I think, you know, we’ll see people in the office when they need to be.

We’ll see them in maybe a few times a week. But I do think there’s going to be a lot more work from home for people who can do that. And I don’t think that’s a bad thing. Maybe we’re going to reduce our carbon footprint from doing that. Maybe we’re going to be more invested in our communities and our neighborhoods, as we walk around, take our lunch break during the day, or whatever it might be. We get to go to our kids’ soccer games a lot more easily. So, I think there are some advantages to that. But those are the two trends I would say are on the horizon and one, you know, once the kids can get vaccinated, a bit more normalcy, more economic activity, which is going to help the labor market and two, I think that the work from home thing is going to stay, and we have to figure out how to make that work for everyone.

Pieta Blakely  25:47 

So, not for profits have been concerned in this labor market, that they can’t hire, because they tend to pay less than private sector companies, or they’re not able to increase wages. In some cases, they can’t bring the participants back to their programs, which means that they don’t get funding for those participants, which means they can’t bring the staff back, which means that they can’t bring the participants back because they don’t have enough staff. So, is there any particular advice to not for profits or any particular way that they’re being affected now?

Alicia Modestino  26:27 

I think there’s three things to be thinking about with not for profits. One is, you’re right, you do always compete with the private sector. If people are looking for dollars, it’s hard to compete that way. We’ve always seen that in the greater Boston area where housing is really expensive. That makes it hard for not for profits to hire, simply because their employees have that big nut to crack every single month in terms of a mortgage payment. But I do think there’s actually some advantages. So, one is that with this great resignation. It’s not just all about getting a higher paying job or living in a part of the country you’ve always wanted to. It’ about how you are going to spend your time meaningfully. And for a certain sector of the population, that means wearing the white hat, doing the good work, you know, taking a job that maybe has more meaning in your day to day, that you’re willing to take time away from your kids or whatever else you enjoy, to be able to do it. And so, I think that not for profits really can use that to their advantage and attract a workforce who even just believes more forcefully in the mission that they’re trying to accomplish. And then the second thing I would say is, you know, there’s $350 billion in the American rescue plan that is earmarked for states and localities right now. I am on, I think four of the recent EDA build back challenge grants that are going to be a $500,000 planning grant, and then it’s going to follow on with 25 to $75 billion. There’s lots and lots of money that is sloshing around right now. So that not for profits really shouldn’t be in a good position to work with a city or a state to be able to get a piece of that pie for their constituents and then hopefully grow back or even beyond where they were before.

Pieta Blakely  28:13 

Yeah, that is great advice.

Cynthia Rojas  28:14 

Yeah, that’s good to hear. That’s really good to hear. We’ve learned a lot. And so, I thank you because I feel like I, you know, when I hear these stories about what we think is happening, it just doesn’t feel right to me. So, I’ve really enjoyed having you on and hearing. It’s a lot more complex than we realize.

Pieta Blakely  28:42 

Yeah, it’s a lot more complex. And it looks like you know, it’s asking employers to think a little bit differently, to approach employment, to structure jobs differently, and to be flexible, about things that they might not have thought they needed to be flexible, about, like scheduling, like pay, like working from home benefits like that.

Cynthia Rojas  29:06 

Yeah, and I love the way that people have really pushed to make the change happen. The fact that companies are paying people more and they have to be innovative, you know, gone are the days – we had someone last week, Chanelle, who was saying that gone are the days where as the employer, I sat and waited til you came to me looking for a job. Employers now have to be innovative. That war on talent that existed before the pandemic just got even more competitive as a result of the pandemic. And so, all these changes are really being led by individuals, and for that, I am eternally grateful for this time.

Alicia Modestino  29:55 

I think we couldn’t have predicted this, you know, over a year ago when the pandemic first hit but because of the response in terms of having this support in terms of unemployment benefits, andother kinds of worker supports that are out there, it’s really a time where we’re seeing a shift of the power from employers back to workers again. Workers suddenly have a voice in what they want. They’re voting with their feet. And if you’re an employer who is not offering a good job, a good pay or a good working environment, then you’re going to lose out and we know from basic economics that it’s a competitive world out there, and so they’re going to need to up their game to be able to hire workers.

Cynthia Rojas  30:37 

Yes, yes.

Pieta Blakely  30:40 

Alicia, thank you so much for joining us today. And everybody, thank you so much for your participation. And please continue to put your thoughts and responses in the comments. We’ll follow up. You have a great weekend, everybody.

Cynthia Rojas  30:53 

Bye. And thank you, Alicia. So great having you. Bye, Pieta.

Alicia Modestino  30:57 

Thanks for having me. Bye bye.

Pieta Blakely

About Pieta Blakely

I help mission-based organizations measure their impact so that they can do what they do well. I started my nonprofit career as a teacher in workforce development and adult basic education. It was important work and I was worried that we didn’t really know if we were doing it well. In the process of trying to answer that question, I got a Masters in Education and a PhD in Social Policy, and became an evaluator.

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