Rep. James Comer.Mark Humphrey/AP Photo; Jon Cherry/Getty Images.
The good from this is that we've seen low-wage appreciation without the government having to raise the minimum wage through more rules and regulations.
Kentucky's 1st Congressional District is home to Republican Rep. James Comer, who spoke about how the labor shortage is benefiting his state. Congress hasn't agreed on a new minimum wage in 12 years, but if pay doesn't spiral out of control, the shortage can accomplish that.
In Kentucky, the labor shortage has been particularly intense. A report published in October indicated that the state had the highest quits rate and job opening rates in the country. Unusual hiring trends are expected to continue through 2022, and Kentucky is still at the epicenter of the labor shortage months later.
Insider spoke with more than a dozen Kentuckians to find out what's behind the shortage and how it could be solved, and spoke to representatives from both the Democratic and Republican sides of the aisle. John Yarmuth is the retiring chair of the House Budget Committee and his district includes all of Louisville.
The labor shortage could be a turning point for the district's economy. He said that recent wage hikes probably needed to happen. He thinks that the free market should solve unemployment, but it shouldn't be allowed to run so free that wage hikes turn into an inflation crisis. He said that the state has been in a workforce crisis for many years and that it has been a problem with Social Security disability benefits. He pointed out how rivalry weakens the job market.
In November 2022, Comer will be up for reelection.
The representative from Insider talked about the labor shortage, Kentucky's hiring challenges, and how the tug-of-war between employers and employees is shaping up. The interview has been edited.
Kentucky's labor-force participation rate has been falling for most of the last two decades. Policy has played a role, but what drove that?
Kentucky has been in a workforce crisis for a long time. There are pockets in and around Kentucky where a large percentage of the population has been declared disabled.
There was a big transition from welfare to disability when Bill Clinton was in Kentucky. Being declared disabled became a new welfare.
In Kentucky, the rules are so easy to follow that you can get welfare and extended unemployment. The people who want to game the system benefit from the rules.
Kentucky was the state with the third-highest percentage of residents receiving disability benefits via Social Security, according to Insider. Various studies support the claim that disability aid is paid through the federal Social Security program.
The unemployment programs got a boost. How has that affected workforce participation?
It made the situation worse.
The extended unemployment programs were bungled by Gov. Beshear. Employers called our office every day complaining that their employees wouldn't come back to work because they didn't have to, because of the government shutdown. They could make a lot of money on unemployment.
A lot of employees were out of work for a long time when they should have been out for 10 days.
It has always been abused. The district is on the Tennessee border. It's harder for people to get unemployment in Tennessee than it is in Kentucky.
If you drive through eastern Kentucky, you'll see billboards telling you to call a law firm to get on disability. It's an industry in some counties. It's a fraud that has developed into a huge industry.
Kentucky's program requires beneficiaries to only report one job contact each week, while Tennessee requires beneficiaries to provide detailed contact information for at least three prospective employers every week.
What have you been hearing from businesses in your district about how they're trying to hire during a reopening? How has the jobs recovery changed?
It is a dire situation. People think it's just low- wage restaurant workers. Everyone is included. It's manufacturing. It's financial services. Even the construction industry.
They didn't have as bad of a labor shortage before COVID and the federal government allowed for extended unemployment in Kentucky. It's been frustrating.
Some of the workers that gamed the unemployment system are starting to go back to work, and employers are starting to offer sign-on bonuses because there's such a shortage of workers.
A lot of employers have faced that problem. There are a lot of musical chairs. You have employees who are working at a place until they get a sign-on bonus, then they go to another place and get another sign-on bonus. Kentucky employers are fighting to hire and retain workers.
The labor shortage is expected to last well into 2022. What will it take for that to end?
There shouldn't be a lot of unemployment claims being paid out. I think the unemployment program should be temporarily suspended by the federal government to give people who can't find work a break.
Democrats in Washington are talking about raising the minimum wage. The market has.
Many of the workers we've talked to think that this is a good thing for the economy because they have more options and the shortage is driving wages higher. Do you think there is some good coming from the labor shortage?
Conservatives would come back and say, "Let the market determine the wage" when the Democrats in Washington were talking about raising the minimum wage.
The market has. The increase in pay for the low- wage jobs probably needed to happen for people to be able to work. We've seen low-wage appreciation without the government having to raise the minimum wage through more rules and regulations in the private sector.
There is a need for some Kentucky workers to have some kind of support for their children. What can Kentucky do to solve that problem?
It's always been a challenge to find a place to stay. It is a challenge at my house. The states and the counties that didn't have in-person learning made that a bigger challenge. If the kid has to stay home from school, someone has to watch them because there are no other options.
The employment situation in Kentucky was adversely affected by the shutdown of in-person learning in public education because parents had no choice but to leave the workforce and keep their young children at home.
The labor shortage is the way for the market to solve the minimum wage problem, but you have also raised concerns about people not returning to the workforce. Where do you think the middle ground is between the two trends?
The market will work itself out. It's a win for low- wage workers, because I don't know anywhere in my district that's offering a beginning salary around minimum wage. I know everything is at least 30% above the minimum wage. The minimum wage is no longer enough to cover the cost of Mcdonald's and the lowest wage jobs.
If you're an adult and have a family, the minimum wage isn't a living wage. This has helped a lot of low- wage workers.
Wages go up so much that it leads to inflation. Inflation is happening every day. A lot of the gains that low-wage workers will have are going to be offset by inflation.
Do you think there are other hiring barriers in Kentucky that aren't talked about in the national conversation about the labor shortage?
One of the biggest issues in Kentucky is border security. The average Kentuckian and their employer don't see eye to eye on amnesty.
Employers want workers. They see an opportunity to hire workers when people come across the border illegally.
In Kentucky, the average worker is appalled that we don't have border security. Employers are calling us wanting more H-2A workers.
When they announced they were sending some Afghan refugees to Kentucky, we got calls. Several employers called me and asked if they could hook me up with someone and see if I could use them as workers. Employers in Kentucky are bucking conventional wisdom with respect to border security and immigration, because of the desperate employment situation.
My position is to secure the border. I'm open to more H-2A and H-2B workers because there's always been a shortage of workers in construction and agriculture.
H-2A visas are issued to foreign seasonal agriculture workers when US workers aren't available; H-2B visas are similar but pertain to industries outside of farming.
Has the average Kentuckian changed their stance on border security because of the labor shortage?
They don't like the idea of having a policy that would allow people in this country illegally to work. It's 99% in my district if you poll it.
The employers are the ones that are open to it. It's terrible.
What do you think the media is saying about the labor shortage in Kentucky?
When I say there are too many people on disability, people think it's politically incorrect.
Kentucky has an industry to help people with disabilities. The media doesn't understand it. They think that's a hard-hearted person when they hear that.
I'm the only member of Congress who grew up in the area. I can tell you that the worker participation rate has been impacted by my broad section of the state.
In Kentucky, there are 15,000 people who can't fill 25 jobs if a new industry moves in. The disability industry is one of the biggest reasons why.
It's difficult to compete against Tennessee because most of my district is on the Tennessee state line. They do not have an income tax. They have tighter unemployment rules that lead to less fraud. They do not have a disability industry.
I will give you another example. Thirty percent of Kentucky is on Medicaid. Medicaid covers 13 percent of Tennessee. Two states that have everything in common have a big difference.
If you go to work in Kentucky, you will lose your Medicaid. Medicaid is the best health-insurance plan.
These things are hard-hearted. If you really want to understand the problem, you should look at the Medicaid systems abused in Kentucky, unemployment systems abused in Kentucky, and the SSI disability system abused in Kentucky. The lowest worker-participation rate is due to that.
Yarmuth will disagree with that. I am correct and he is wrong.
The Medicaid expansion under theAffordable Care Act was adopted by Kentucky and Tennessee.
Business Insider has an original article.
