Ohio government Mike DeWine said on Thursday that the state would end its participation in federal unemployment programs on June 26.
Justin Merriman | Getty Images News | Getty Images
So what’s going on?
At least 16 states have chosen to withdraw from federal programs that pay unemployment benefits.
Starting Thursday, they will include Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah, and Wyoming.
They are all headed by Republican governors. Montana was the first state to announce its withdrawal on May 4.
How quickly will this happen?
The US bailout made these federal programs available until Labor Day, September 6.
States will end their participation about two or more months earlier – sometime between June 12 and July 10. (It varies by state.)
How many people have been affected?
Governors’ decisions would cut or stop benefits for nearly 2 million people.
According to Andrew Stettner, a senior fellow at the Century Foundation, about $ 11 billion in total funding is at stake.
What programs are involved?
States are withdrawing from programs enacted by the CARES Act in March 2020.
Together, the programs increased the amount of weekly aid, extended its duration, and provided funds to workers who are typically not eligible for state benefits.
How do my benefits change?
States will no longer provide workers with an additional $ 300 per week.
Those who receive state benefits will continue to receive that support, which usually equates to half their wages before dismissal. According to the Department of Labor, the average person received $ 350 a week in state benefits in March.
(Benefits vary widely by state. For example, among the states opting out, they ranged from $ 195 per week in Mississippi to $ 480 in North Dakota.)
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Certain employees will not only receive a discount on the benefit, they will lose aid completely.
Those groups include the long-term unemployed (who have exhausted their maximum allocation to government benefits), as well as gig workers, the self-employed, freelancers, and others who have what is known as pandemic unemployment assistance.
This is the case in most – but not all – states in question. For example, in Arizona, residents only lose access to the $ 300.
Why is this happening?
Governors have pointed to labor shortages as the driving force behind their decisions to opt out of federal funding.
They argue that improved unemployment benefits are an incentive for people to stay at home and not look for jobs, making it difficult for companies to fill job openings.
“While these benefits provided additional financial support during the peak of COVID-19, they were intended to be temporary, and their continuation has instead exacerbated the workforce challenges we face,” said Missouri Governor Mike Parson.
Is there a labor shortage?
According to economists, it is difficult to find the answer with the available data. But there is some evidence that there is a labor shortage, at least in some areas and sectors.
The most compelling evidence is twofold, according to Daniel Zhao, a senior economist at Glassdoor, a job posting and recruiting site.
Vacancies hit an all-time high in March, the Bureau of Labor Statistics reported Tuesday. Meanwhile, the U.S. economy added 266,000 jobs in April – far weaker than the expected 1 million, the Bureau said last week.
In other words, there is a high demand for labor as the economy opens up again, but there is no proportional flow of workers on the payroll.
Where are they most acute?
The shortages appear to be most pronounced in sectors such as leisure and hospitality, including hospitality and restaurants.
This is where most of the anecdotes of shortages among business owners seem to come from, and where companies like McDonald’s and Chipotle are raising wages and offering bonuses to attract employees, Zhao said.
Some states are likely to face labor shortages more than others.
In Montana, for example, the job market appears to be near pre-Covid status, unlike the rest of the US, according to Peter Ganong, an assistant professor of public policy at the University of Chicago.
Many (but not all) states that opt out of federal benefits have unemployment rates that are below the national average of 6.1%. (For context, the national rate is still nearly double the pre-pandemic level of 3.5%.)
Are unemployment benefits the problem?
Unemployment benefits probably play at least a minor role, economists said.
Research suggests that higher benefits reduce the intensity of the job search. This was not a problem before during the pandemic, when jobs were scarce. But it is difficult to say how much they are or are not a factor.
Are there any other factors?
According to labor experts, the coronavirus – and not unemployment benefits – is probably the most important problem.
New daily infections, as they fall, are still in the tens of thousands. And, according to the Centers for Disease Control and Prevention, less than half (46%) of American adults are fully vaccinated. (That proportion, including seniors, is lower among the workforce.)
Vaccines were also not widely available until recently. According to Diane Swonk, chief economist at Grant Thornton, it takes workers two to six weeks for the regime to be fully operational – meaning many won’t be able to safely return to work until June.
There are other pandemic-era contributions as well: erratic school reopenings, childcare duties, and a lack of after-school programs that largely help low-income parents. Many baby boomers opted to retire early and may not return to work, reducing the overall labor supply.
The discussion about labor shortages is also often separate from the issue of wages and hours – workers may want a job, but not at current wages or with erratic or part-time schedules.
It can also be unrealistic to expect employees to take jobs at the same rate that jobs are posted. The labor supply typically 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. “So many different headwinds are blowing at the same time.”
Furthermore, states withdrawing from federal unemployment funding may mitigate some of the demand for businesses – and the need for additional workers – if it contributes to reduced spending at the local level.
Some states pay a return bonus. What is that?
Montana and Arizona are replacing increased unemployment benefits with a one-time bonus for people who find and keep jobs.
Arizona offers bonuses of $ 1,000 and $ 2,000 (on a first-come, first-served basis) to those who find a part-time job and a full-time job, respectively. They must complete a minimum of 10 weeks of work.
Montana pays a bonus of $ 1,200 to people who find full-time jobs for four weeks.
Is this all set in stone?
Senator Bernie Sanders, I-Vt., And the National Employment Law Project this week petitioned U.S. Secretary of Labor, Marty Walsh, to intervene on behalf of employees.
They claim that Walsh has the legal authority to prevent the loss of benefits to the self-employed, chores, and other workers who collect PUAs because of certain wording in the CARES Act. (It seems, however, that the same flexibility wouldn’t apply to other programs.)
It is unclear whether the labor department will attempt to intervene.