States prematurely terminate federal unemployment benefits. What there is to know
Ohio Governor Mike DeWine said Thursday the state would end participation in federal unemployment programs on June 26.
Justin Merriman | Getty Images News | Getty Images
At least 16 states have chosen to opt out of federal programs paying unemployment benefits.
Thursday they include Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah and Wyoming.
All are headed by Republican governors. Montana was the first state to announce its withdrawal, May 4.
The American Rescue Plan made these federal programs available until Labor Day, September 6.
States end their participation approximately two months or earlier – from June 12 to July 10. (It varies by state.)
Governors’ decisions would reduce or interrupt benefits for nearly 2 million people.
About $ 11 billion in total funding is at stake, according to Andrew Stettner, senior researcher at the Century Foundation.
States are withdrawing from the programs enacted by the CARES law in March 2020.
Together, the programs have increased the amount of weekly assistance, extended its duration, and provided funds to workers who are generally not eligible for state benefits.
States will no longer issue an additional $ 300 per week to workers.
Recipients of state benefits will continue to receive this assistance, which is usually half of their salary before the layoff. The average person received $ 350 a week in state benefits in March, according to the Department of Labor.
(Benefits vary widely from state to state. Among opt-out states, for example, they range from $ 195 per week in Mississippi to $ 480 in North Dakota.)
Some workers will not only get a reduction in their benefits – they will lose their assistance entirely.
These groups include the long-term unemployed (who have exhausted their maximum state benefit allowance) as well as on-demand workers, the self-employed, freelancers and others who receive what is known as l unemployment assistance in the event of a pandemic.
This is the case in most – but not all – of the states in question. In Arizona, for example, residents only lose access to the $ 300.
Governors have indicated that labor shortages were the driving force behind their decisions to withdraw from federal funding.
They say improved unemployment benefits make people stay home and not look for jobs – leaving companies struggling to fill vacancies.
“While these benefits provided additional financial assistance during the height of COVID-19, they were intended to be temporary, and their continued existence instead made the workforce issues we face worse,” the governor said. from Missouri, Mike Parson.
It is difficult to determine the answer with the available data, according to economists. But evidence suggests that labor shortages are occurring, at least in some areas and sectors.
The most convincing evidence is twofold, according to Daniel Zhao, senior economist at Glassdoor, a job and recruiting site.
Jobs hit a record in March, the Bureau of Labor Statistics reported on Tuesday. Meanwhile, the US economy added 266,000 jobs to the payroll in April – much lower than the expected million, the Bureau said last week.
In other words, there is a strong demand for labor as the economy reopens, but not a proportional influx of workers onto payrolls.
The shortages appear to be more pronounced in sectors such as recreation and hospitality, which includes food services and restaurants.
Some states are likely to experience a more labor shortage than others.
In Montana, for example, the labor market appears to be close to pre-Covid status, unlike the rest of the United States, according to to Peter Ganong, assistant professor of public policy at the University of Chicago.
Many states (but not all) that opt out of federal benefits have unemployment rates below the national average of 6.1%. (For context, the national rate is still almost double its pre-pandemic level of 3.5%.)
Unemployment benefits probably play at least a small role, economists said.
Research suggests that higher benefits reduce the intensity of the job search. This was not a problem at the start of the pandemic when jobs were scarce. But it’s hard to say how much of a factor they may or may not be now.
The coronavirus – not unemployment benefits – is probably the main problem, according to labor experts.
New daily infections, while decreasing, still number in the tens of thousands. And less than half (46%) of American adults are fully vaccinated, according to at the Centers for Disease Control and Prevention. (This share, which includes the elderly, is lower among the labor force.)
Vaccines were also not widely available until recently. Workers need two to six weeks for the scheme to be fully effective – meaning many cannot safely return to work until June, according to Diane Swonk, chief economist at Grant Thornton.
There are other factors contributing to the era of the pandemic as well: irregular school reopens, childcare duties, and a dearth of after-school programs that greatly help low-income parents. Many baby boomers have chosen to retire prematurely and may not re-enter the workforce, reducing the overall labor supply.
The discussion of labor shortage is also often separated from the issue of wages and hours – workers may want a job but not at going wages or on irregular or part-time schedules.
It can also be unrealistic to expect workers to accept a job at the same rate that jobs are posted. Labor supply generally takes longer to respond than demand, Zhao said.
“I don’t think it’s possible to quantify how much each factor contributes to labor shortages,” he said. “There are so many different headwinds blowing at the same time.”
Additionally, states that forgo federal unemployment funding may dilute some of the demand for businesses – and the need for additional workers – if it helps reduce spending locally.
Montana and Arizona are replacing enhanced unemployment benefits with a single premium for people who find and hold a job.
Arizona is offer Bonuses of $ 1,000 and $ 2,000 (on a first come, first served basis) to those who find part-time and full-time employment, respectively. They must complete at least 10 weeks of work.
Montana pays a bonus of $ 1,200 to people who find full-time employment for four weeks.
Senator Bernie Sanders, I-Vt., And the National Employment Law Project this week called on US Secretary of Labor Marty Walsh to intervene on behalf of workers.
They argue that Walsh has the legal authority to prevent the loss of benefits for freelancers, concerts and other workers who collect PUA, due to certain terms of the CARES Act. (It appears, however, that the same flexibility does not apply to other programs.)
It is not known if the Department of Labor will attempt to intervene.