The shrinking U.S. workforce during the Covid pandemic is “going to cripple” the economic recovery, billionaire investor and businessman Barry Sternlicht warned Wednesday.
The founder of Starwood Capital Group, which operates hotels as part of its broader portfolio, said the federal government should pay people go back to work, not to stay home.
“The whole service economy is in a crisis whether it’s restaurant, a pizzeria, a laundromat, a small shop. Amazon can raise wages, no problem,” but mom-and-pop shops can’t, Sternlicht said on CNBC’s “Squawk Box.”
Sternlicht said sometimes it’s not about the money.
As an example, one of his hotels in Brooklyn, New York is trying to fill 40 jobs on its 220-person staff.
“It isn’t not even what we pay. They won’t leave their house or whatever they are doing,” he said, stressing the low labor participation rate, while there are millions of job openings, is “really hurting the underbelly of the U.S. economy.”
Employment vacancies, which fell to 10.44 million during August, are still historically off the charts. The Labor Department’s latest Job Openings and Labor Turnover Survey, released Tuesday, showed the shortage was exacerbated by a record 4.3 million workers quitting their jobs in August.
The drop in the unemployment rate in September, despite a much weaker-than-expected hiring, came as the labor force participation rate edged lower. The labor force participation rate, a measure of people working or actively looking for work, has not roared back as business activity has surged with the lifting of Covid mitigation closures and restrictions.
The government, which has spent trillions of dollars to help unemployed people and struggling businesses, should direct any further efforts to incentivizing a return to work, Sternlicht said.
“They should actually pay people a bonus for going back to work, and getting back in the labor force, off federal programs and state programs,” he said. “Then they tax them because they have a job.”
Sternlicht, who has described himself as socially liberal and fiscally conservative, said the Biden administration is “overdoing it in the wrong direction. All these support programs … may exacerbate that problem and encourage people to stay home. And the country can’t really work without its service people back.”