Constraints on New Hampshire’s Workforce Recovery
Impacts from COVID-19, Child Care and Benefit Program Design on Household Labor Market Decisions
The COVID-19 pandemic created a range of health, economic, and social policy challenges for New Hampshire. Changes in economic conditions have deepened existing challenges for vulnerable populations and communities, while other households have faced new challenges around decisions regarding employment and child care that they had never anticipated. As New Hampshire seeks to accelerate its economic recovery, this study focuses on key factors that impact the decision-making of households and may serve as constraints to returning to the workforce or expanding their participation.
This study began in December 2019 pursuant to a legislative requirement to understand the economic implications of benefit cliffs. These “cliffs” result from situations in which increases in earned income lead to decreases in net resources for households due to a loss of program benefits, disincentivizing workforce participation. These cliffs can lead to either short-term losses for these households or long- term losses if households opt for (rational) short-term choices to forgo potential wage increases that lower their long-term earnings trajectory and economic mobility, which thereby also limits economic growth, particularly important in a state like New Hampshire with an aging workforce and historically low (at the time) unemployment levels.
The onset of the COVID-19 pandemic in March 2020 changed the economic landscape of New Hampshire and the employment decisions faced by its households. Accordingly, this study has been expanded to analyze a broader range of factors that represent constraints on New Hampshire’s workforce recovery:
Unemployment: The availability of employment has shifted with the pandemic, as industries and communities have been differentially impacted by temporary and permanent business closures. While overall unemployment rates have declined, disparities persist in the impacted populations, communities, and sectors, as well as reasons for unemployment.
Child Care: The disruption in patterns of living have also created or exacerbated household challenges around managing child care and employment. The affordability, availability, and quality of child care all impact parents’ and caregivers’ decisions to participate in the workforce, which in turn limits economic productivity and exacerbates disparities.
Benefit Cliffs: Program designs in which additional earned income can result in a net loss of resources through the loss of benefits continue to factor into the employment choices that households make. Key benefit programs administered by state or local agencies, including Medicaid, TANF, SNAP, LIHEAP, housing, and child care subsidies, can produce these situations, creating employment disincentives for participating families.