Tuesday, May 25, 2021

Ending UI Won't Fix Cedar Point's Woes

In the last week, ripples went across the internet theme park/amusement park fan communities to Cedar Point announcing that it would be increasing its wages to $20 an hour, a virtually 100% increase over 3 years ago. This was shocking to many observers of the industry.... but not us at Parkscope. We here at Parkscope have been beating the drum for a while about the disastrous way in which many regional amusement and theme parks were opting to staff. There's an entire article written back in 2017 about this exact topic, and I assure you, very little has changed except for one key difference:

Parkscope: How Is Theme Park Labor Market Formed? How Park Get People?

See, back in 2017, there was no pandemic, and without a pandemic, international travel could happen without any serious barriers. Visa workers could come to town, and in fact, Cedar Fair made it clear in their quarterly statements to shareholders that they would expect to rely on J-1 visa employees to staff the park. Those people do not exist in 2021. In spite of this clear and obvious issue for Cedar Fair's staffing, attention has primarily turned to Unemployment Insurance, a popular target of the Republican Party.

Let me first be clear: Is unemployment insurance a potential threat to getting people "back to work"? Yes. It is. Especially when it comes to people who might be waiting to get a higher paying, higher skill position like they used to have but feel compelled due to a lack of UI to do something in the meantime like work retail. But that's also largely theoretical. We at Parkscope prefer facts. Facts, I'm told rather consistently, don't care about feelings. So where do we find facts? We find them with the US Bureau of Labor Statistics.

US Bureau of Labor Statistics Data - Ohio

According to the Bureau, in February 2020, the month prior to the pandemic, the unemployment rate (U3, the most commonly used) of the State of Ohio was 4.7%, with 279403 unemployed persons. The unemployment rate at the end of March 2021 was 4.7%, with 271280 unemployed persons. The clear difference between these two time points was the labor force participation rate, with a shift down from 63.1% to 62.3%, or a loss of just over 132,000 workers in Ohio's labor force. 

Critics of the UI will point at the benefits as having caused that drop, however they have absolutely no evidence whatsoever to prove it. You'll hear statements like "It's common sense that people would stop working if they could make more sitting at home" in lieu of actual evidence. Obviously, these people are either unaware or playing stupid when it comes to the fact that most full time employment in the United States provides non-cash compensation as well, such as health care and retirement account matching. Health care seems particularly salient in a situation where one is living in a pandemic.

There are, of course, other theories being posited for why there is a dramatic shortage in jobs nationally, and not just Ohio, commensurate with large shifts in the labor force participation rate:

-People with children, particularly mothers, were forced out of the workforce due to a lack of daytime care for children during the pandemic. Obviously, not all schools went to virtual only in the US, with some universities and school systems (state dependent) barely closing. Analysis by the Peterson Institute for International Economics suggests that only a small fraction - less than 10% - of the total decline in workforce. 

-People are changing fields: College enrollment is generally still down, suggesting that education is not where people are heading after leaving the workforce. Shortages in trained labor fields seem to suggest that if there is a boost in enrollees to enter the industry, there is a serious lag in getting people trained. There simply isn't enough data to establish this as a significant reason as well.

-People died. According to the CDC's statistics as of today, May 25th, over 91,000 people aged 18-65 died of the Coronavirus. The disease took an additional 228,000 lives between ages 65-84, which while not traditionally of working age, were certainly people who may have contributed part or even full time to the work force up until death. Additionally, a preprint paper looking at job role and COVID death determined that many of the deaths took place in industries with lots of untrained labor - the pools amusement and theme parks are primarily drawing from

-People who could retire did. Lots of anecdotal evidence for this, but it suggests many people who were near or at retirement age left the work force. Articles such as this from Bloomberg detail an increasing interest from younger workers on the retirement age spectrum (mid-late 50s) in early retirement as a result of the COVID pandemic. Early retirement by middle managers or executive level employees who were laid off as a result of the pandemic has not been analyzed to any degree, but cannot be discounted, though it has minimal effect on things like amusement park staffing.

-Low wages are causing the employee shortage. Some might suggest this is a UI thing again, but clearly the spread of stories about Klavon's Ice Cream Parlor caught a lot of ears. Perhaps we all forgot what the world was like before COVID, but a labor shortage isn't a new story. Here's an article about it putting stress on the economy in 2019. And it hitting a critical point in 2018. And it becoming a dire issue in 2017. Or this article about 2016 predicting FIFTEEN YEARS OF LABOR SHORTAGES off a thinktank report. And in 2015. And in 2014, here's an article about the canary in the mine, farm labor, and how it had been experiencing long term shortages. Did we mention gig work and it supplementing incomes and changing the demands of laborers? We should link to an article about that too.

We detailed in our article back in 2017 that labor force participation among younger people was decreasing and explained why. Now we see clear evidence it is likely to decrease on the upper end of the 55-64 spectrum as well. That there is a labor shortage shouldn't be surprising: we've been in one for at least 6 years, with only the shutdown of western civilization for a calendar year being a difference maker. The one way businesses have to compel people to work is to pay them lots of money. That's it. Concerns about inflation? Well, inflation is generally inevitable and at this point we have so seriously underpaid labor for so long that there will be consequences. That doesn't necessarily mean standard of living will go down as long as wage growth outpaces inflation, of course, but no one is going to tell you that who's also blaming UI (it's a very inconvenient fact). We will, because we aren't full of shit. And because we aren't full of shit, let us tell you very forthrightly - what else did you expect this year?

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