Nobel-Winning Poverty Researcher on Why People Aren't Going Back to Work

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  • MIT professor and poverty expert Esther Duflo says the political debate over unemployment benefits and a tight labor market misses the bigger picture of how Covid has changed the world, while also highlighting some long-term social issues.
  • Child-care costs hinder women in the workplace more than men.
  • Relocation is a factor, too, and many workers are also searching for better jobs.

The pandemic has forced society to confront how health and economic fragility are correlated, and there is hope that having some hard conversations about social and income inequality will become easier. But if the recent debate in the U.S. over jobless benefits and the labor market are any indication, it's still not clear that a long-term shift is more likely underway than a reversion to old partisan talking points.

For Esther Duflo, a French-American economist and MIT professor who is the youngest person to receive a Nobel Prize in economic sciences — and only the second woman to receive the award — understanding the lives of the poor and how to design antipoverty measures has been a professional mission long before the pandemic.

On the road to economic recovery, Duflo tells CNBC that gender inequality, unequal access to child care, return to in-person work mandates and vaccine access are among the many pressing issues surrounding return to work in the United States and the global economic recovery.

But when it comes to the debate over whether statewide unemployment benefits are responsible for workers choosing to stay out of the labor market, Duflo says economists such as herself aren't satisfied with an opinion not based on actual research.

Unemployment benefits and a tight labor market

Last month, a myriad of states across the country ended their $300 weekly unemployment benefits ahead of the federal expiration date on Sept. 6, and a few of these states are even offering a $2,000 return-to-work bonus. 

State leaders removed benefits in hopes of solving hiring challenges for businesses, but Duflo is in agreement with many economists who don't think this is either the cause or solution for the country's tight labor market.

"This is not the reason people aren't going back to work as quickly as we think they ought to," Duflo said.

She says that doesn't mean more of a financial cushion and support from the government has not at all influenced on how people plan and act. But Duflo was clear that soundbites about "lazy" Americans are wrong. People may, in fact, need more time to pick the right job and, in many instances, relocate for a job.

And in the few weeks since states suspended benefits, it has not increased workforce participation, and in some cases, it hurt the economy by decreasing household spending.

There are still more than 10 million Americans enrolled in pandemic-related programs, but Duflo said unemployment benefits gave people flexibility, and "doesn't make people lazy."

The latest initial jobless claims number released on Thursday ticked up, but there is a decreasing number of continuing claims, the lowest level for insured unemployment since March 2020.

Return to work is harder for women

As people attempt to return to work, child care costs burden women more than men. Many women are forced to stay home, not because they don't want to return to work, but because their jobs do not offer flexible options, don't pay enough to cover child care costs, or they don't have access to child care providers.

These are not new issues, and the pandemic has brought them back to the forefront as women made up the brunt of job losses in the U.S., reversing decades of gains.

"We realized the current system is just not very workable. It just barely works. Women sustain themselves by pulling on their own boot straps," Duflo said.

As the U.S. federal government fights over the definition of infrastructure — many Democrats are pushing for funding that encompasses "human" infrastructure like child care and paid leave in new legislation — Duflo said the U.S. is behind on child care. In other developed regions, such as Europe, child care is viewed as a societal effort, whereas the U.S. pushes responsibility of child care solely onto mothers, she said.

On top of that responsibility, Duflo said there is a push in the U.S. for people to work unnecessarily long hours and women are then pushed further behind male colleagues if they cannot keep up because they need to raise children.

Covid has resulted in a reevaluation of the balance between work and family, but it has not solved the big issues for professional women.

"This is a major hindrance standing in the way of women succeeding in careers," Duflo said.

Vaccine inequity hinders global progress

Before the pandemic, it was estimated it would to take 150 years to close the gender inequality gap between women and men, according to the World Bank. Beyond the U.S., lack of vaccine access will likely prolong the closing of that gap, and lead to broader issues in the global economy.

"The global inequality in vaccine access is a shame," Duflo said. She said richer countries, such as European countries and the U.S., are stockpiling vaccines when a small percentage of people in poorer countries are vaccinated.

Countries in Asia were some of the first to be hit strongly by Covid-19, and they might be among the last few continuously hit due to their low vaccination rates. "It makes no sense not to have some amount of sharing and respect across the world," Duflo said. "We have to correct this quickly."

In May, the International Monetary Fund said $50 billion needed to be spent to get 40% of the global population vaccinated by the end of 2021. Duflo said $50 billion is a small amount that the U.S. could pay compared to the trillions of dollars spent on federal stimulus packages.

"It is great news that the U.S. committed to give 500 million vaccines, but there are seven billion people in the world," Duflo said. "We need to vaccinate as soon as possible four billion of them."

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