How Biden's stimulus could cause some large companies to raise wages and bring childcare to the forefront

• Wages climbed modestly in April, a signal that businesses may be boosting pay to attract workers.
• Some big employers are boosting pay and expanding the types of incentives they are offering.
• Biden is signaling he will start encouraging states to reimpose job-seeking requirements for unemployment recipients.

The picture of American employment - and unemployment - is a confusing one right now.

Some employers say there's a rampant labor shortage in sectors of the economy such as restaurants, with workers opting to remain on generous unemployment benefits instead of returning to work. The April jobs report on Friday showed that employers added 266,000 jobs, an amount well below forecasts for a million new payrolls or more.

The data provided new heft for Republicans and business groups to argue that the $300 weekly federal unemployment benefits from President Joe Biden's stimulus are keeping people from seeking open jobs, curtailing the economic recovery. The Chamber of Commerce slammed the jobless aid, saying in a statement that "the disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market."

The labor-shortage increasingly looks evident, as job openings data from March out on Tuesday morning show openings at an all-time high and the job-filling rate at an all-time low, per Jed Kolko, chief economist at Indeed.

Some large companies are increasing hourly pay to fill open positions and coax people who left the labor force or drawing down unemployment to accept a new job. Chipotle announced on Monday it was raising pay for workers by around $2 an hour, bringing its average pay to $15 per hour by June for all employees. It's one of several major employers to hike compensation over the last year, including Walmart and Amazon.

The $300 weekly federal UI expansion is currently set to expire in September.

Some chain restaurants in the historically low-paying industry are also expanding the type of incentives they're offering prospective hires instead of hiking hourly pay. They range from signing bonuses to leadership conferences to 401(k) matching. Still, the Biden administration is doubling down on its stance that simply paying workers higher wages will speed up the recovery.

"My expectation is that, as our economy comes back, these companies will provide fair wages and safe work environments," Biden said Monday from the White House. "And if they do, they'll find plenty of workers and we're all going to come out of this together better than before."

The childcare effect

Childcare is a prohibitive factor in preventing workers from returning, according to experts. A UBS note last week said that, while the "impact of the unemployment benefits may be overstated," a large participation gap remains among workers with young kids - a key group in the labor market.

"I think we've all been very hopeful that we're turning the corner, and we're moving forward, and that components of this pandemic - that the big principal issues of the pandemic are behind us - but I think that we need to rethink that," Misty L. Heggeness, a principal economist and senior advisor at the US Census Bureau, told Insider.

"That's not true for a subset of our workforce. I think we've seen improvements until now because these have been the low-hanging fruits." The lack of childcare is "crippling" our ability to return to work and facilitate economic growth, she said.

According to an analysis from the National Women's Law Center (NWLC), 165,000 women dropped out of the labor force in April. Women only accounted for 161,000 of the jobs added in April. That means that - not accounting for any population growth - it will take women 28 months to return to pre-pandemic employment levels at that pace.

On Monday, the White House said it would be accelerating the distribution of childcare assistance included in the American Rescue Plan. Childcare is also a major plank of Biden's $1.8 trillion American Families Plan.

'Some upward pressure in wages'

The April jobs report showed wages climbing modestly overall, which could partly be due to businesses ramping up efforts to lure people back into the workforce. A Bank of America note on Monday from a team led by Joseph Song noted that average hourly earnings rose 0.7% for all workers after the latest April jobs report.

"When you dig into the details, you saw some pretty remarkable increases in wages in categories like transportation and warehousing, retail, leisure, and hospitality - all sectors that should be seeing a real boom in demand and hiring," Michelle Meyer, the head of securities at Bank of America's US economics team, told Bloomberg. "There's obviously some friction there where there's a whole lot of demand for workers but there isn't enough of a supply at the moment and that's creating some upward pressure in wages."

Still, wages aren't rising quickly enough to address the hiring shortage. Employers may be reluctant to hike pay at this stage, fearful that high consumer demand could taper off later in the year and leave them with excessive payroll costs.

"You're competing with a temporary unemployment supplement," Neal Bradley, executive vice president of policy at the Chamber of Commerce, told The New York Times. "You're not going to make a permanent wage adjustment for a temporary, government-induced distortion," he said, referring to the September expiration of expanded federal aid.

Biden has defended the $300 federal jobless aid as a measure that isn't dissuading people from leaping back into the workforce. However, on Monday he said that the Labor Department would be helping states reimpose job-hunting requirements that were largely waived during the pandemic.

"We're going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits," he said. Twenty-nine states have already done so, according to a White House fact sheet.