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The economy added a better than expected 943,000 jobs in July and the previous two months were revised higher by a total of 119,000. Overall, the economy has added back 16.7 million jobs since bottoming in April 2020, but that still leaves 8.7 million fewer jobs since before the pandemic. The unemployment rate fell to 5.4 percent from 5.9 percent.
Even with the economy’s progress, the mismatch in the labor market persists. Paradoxically, with 8.7 million Americans out of work, there are still about 9 million job openings. Despite hand wringing over extra government unemployment benefits being the culprit, data indicate that early termination of the program by more than two dozen states has not meaningfully impacted the employment landscape.
The situation could change as an estimated 7.5 million people lose their benefits after Labor Day, but like finding the right romantic match, it can take a while for workers and employees to hook up. As a result, the COVID-19 labor bottlenecks could last well into the fall months.
More importantly, the unique nature of the pandemic recession and recovery has done something seismic to the U.S. labor force. Workers at all income levels are thinking about their jobs and careers differently. Some are not enthusiastic about returning to difficult jobs with low pay and no benefits (think bars and restaurants), while others used the past year and a half as a prompt to focus on work-life balance, and how they can improve their long-term outcomes.
Many are motivated by dollars, but more and more, they want flexibility, they want to be part of an organization that considers new approaches to getting work done and achieving goals, OR they are ready to make their side hustle or contract work their main gigs. Before giving your notice, here are steps you should consider.
Schedule MD Appointments: Get those checkups and appointments done while still covered on your current employer’s health insurance plan.
Explore Future Health Insurance Options: If you receive health coverage through your current job, the path of least resistance is COBRA, at least for the next 18 months. Although the cost will likely be steep, your benefits will remain as is. Remember that if you leave your job voluntarily, you are NOT eligible for government assistance to cover COBRA premiums.
Next, investigate the Affordable Care Act (ACA), especially now that the stimulus plan caps premiums at no more than 8.5 percent of modified adjusted gross income (through the end of 2022). There is an ACA open enrollment period already in effect through August 15th, but you may qualify for a Special Enrollment Period due to a life event like losing other coverage, getting married, moving, or having a baby.
Review Life, Disability, and Long-Term Care Insurance Coverage: If you have insurance through work, find out if it is "portable," which means that you can take it with you when you leave. Know that the cost might be more expensive if your employer is subsidizing your coverage.
Don’t Forget About Retirement: When you leave your job, be sure to roll over your existing retirement plan into a new company’s plan, or an IRA Rollover at any major financial firm. If you are going it alone, establish a traditional IRA or Roth IRA. There are also other plans (SIMPLE IRA, SEP-IRA, uni-401k) for self-employed workers, which allow you to sock away a lot of money, but that may not be practical in the early years.
For side-hustlers, there are also a few other issues, like TAXES! As an employee, you split the payroll taxes (for Social Security and Medicare) that are automatically deducted from paychecks with your employer. When you are your own boss, you’re on the hook for the total payroll tax bill. The current tax rate for Social Security is 12.4 percent total (6.2 percent for the employer, which is now YOU) and 6.2 percent for the employee (also YOU). These percentages apply to the first $142,800 of income. Beyond that threshold (known as the SS wage base), you don’t have to pay.
For Medicare, you are on the hook for 2.9 percent total on ALL income earned. If your earned income is more than $200,000 ($250,000 for married couples filing jointly), you must pay an additional 0.9 percent in Medicare taxes. Some of these payments will be returned when you file taxes, but just know that you will need to pay up throughout the year.
If you are not ready to participate in the Great Resignation, a hot job market is a great time to use leverage. Conduct research for your industry and your specific job and then figure out what’s most important for you.
Is it flexibility, pay, or maybe other benefits? If it’s work from home (WFH) that you seek, negotiate limited days in the office by presenting your manager/boss with examples of your productivity and samples of your success amid the pandemic WFH period.
If you can’t get WFH made permanent, be armed with information about the competition and what your job pays, you may be able to argue for a raise, a one-time bonus, and/or more vacation time. You may also want to see if the organization is paying for other benefits like childcare, tuition assistance, additional schooling, gym memberships, and even fancy in-home gym equipment.