Some states are cutting unemployment benefits to push people back to work – are the extra benefits really keeping Americans out of the workforce?




Jobs in the United States topped 8 million in March for the very first time, the Labor Department said on Tuesday, up from 7.5 million jobs opened the previous month, but many employers say that they cannot find workers.

Given Friday’s disappointing jobs report, which found 266,000 jobs were created last month compared to most economists’ forecast of 1 million jobs, many lawmakers are pushing to cut benefits unemployment, which they say would eliminate a growing labor shortage.

President Joe Biden acknowledged that “some employers are struggling to fill jobs” in his prepared remarks on the jobs report.

But when asked if improved unemployment benefits prevented some workers from returning to work, he replied: “No, nothing measurable.”


“Study after study has shown that improving unemployment benefits did not prevent workers from returning to work”


– Senator Ron Wyden (D., Oregon)

White House economist Jared Bernstein said this was true even in states where the ratio of the amount of money people receive in unemployment benefits to their previous salary is the highest. He added that “we listen to these anecdotes [of labor shortages] we take them seriously, we monitor them, ”he said in an interview with Bloomberg on Friday.

But some argue that improved unemployment benefits play an important role in people’s willingness to return to work. The governors of South Carolina and Montana are tracing labor shortages that employers face in their states to federal unemployment benefits and eliminating them in their states.

“Right now there are 81,684 open positions in the state of South Carolina. The hotel and restaurant industries are experiencing employee shortages that threaten their sustainability, ”said Dan Ellzey, director of the South Carolina Department of Employment and Workforce.

“While federal funds have supported our unemployed during the peak of COVID-19, we fully agree that re-employment is the best stimulus package for Southern Carolinians and the state’s economic health.”


“There are 81,684 open positions in the state of South Carolina. The hotel and restaurant industries are experiencing employee shortages that threaten their sustainability ”


– Dan Ellzey, director of the South Carolina Department of Employment and Workforce

South Carolina Gov. Henry McMaster, a Republican, on Thursday ordered his state’s labor department to end all federal unemployment programs. This includes the additional $ 300 per week that unemployed Americans can receive until September as part of President Joe Biden’s US bailout stimulus package.

Collective workers, independent contractors and self-employed workers would not receive any benefits. These workers only became eligible for federal unemployment benefits through a program under the CARES Act known as Pandemic Unemployment Assistance (PUA).

Montana Governor Greg Gianforte, a Republican, goes even further.

In addition to ending Montana’s participation in federal unemployment benefit programs, effective June 27, Gianforte said the state “will initiate a back-to-work bonus program, using federal funds authorized by the government. the American Rescue Plan Act, ”according to a statement released Tuesday.

The program would pay a one-time bonus of $ 1,200 to those hired who were previously receiving unemployment benefits. A person must have benefited from unemployment insurance by May 4, accept a new job and keep that job for at least 4 weeks of paid work.


“Almost all sectors of our economy are facing a labor shortage”


– Governor of Montana Greg Gianforte

“Montana is open for business again, but I hear too many employers across our state who can’t find workers. Almost all sectors of our economy are facing a labor shortage, ”said Gianforte.

“Incentives matter,” he added, “and the vast expansion of federal unemployment benefits is now doing more harm than good. “

The Labor Department did not immediately respond to MarketWatch’s request to find out whether the state could legally reallocate funds set aside for unemployment benefits.


“According to the Chamber’s analysis, the $ 300 benefit means that about one in four beneficiaries earn more when unemployed than they earned while working.”


– US Chamber of Commerce Executive Vice President and Policy Director Neil Bradley

The US Chamber of Commerce, a business lobby group, agrees with McMaster and Gianforte.

“The disappointing jobs report makes it clear that paying people not to work slows down what should be a stronger job market,” said Neil Bradley, executive vice president and chief policy officer of the United States Chamber of Commerce.

“One step policymakers should take now is to end the additional weekly unemployment benefits of $ 300. According to the Chamber’s analysis, the $ 300 benefit means that about 1 in 4 beneficiaries earn more when unemployed than they earned while working.

Other factors preventing Americans from returning to work

Ben Zipperer, an economist at the Economic Policy Institute, a progressive think tank, tweeted this in response to the US Chamber of Commerce:

Zipperer said other factors, including fears of returning to the workplace and inadequate wages, play a role in the equation. “It’s hard to overstate the difficulty and stress that work in the service sector now demands: additional health and safety protocols, anti-vaccine management, serious risk of disease,” he wrote on Twitter . “To ask someone to work for the salary before the pandemic is to ask for a real pay cut.”

Recent research suggests that increased unemployment benefits do not prevent workers from re-entering the workforce, or at least trying to: A Chicago Federal Reserve study earlier in the pandemic, when Americans without employment received $ 600 more per week in benefits, found that those receiving benefits “looked more than twice as intensely” for a job as those who had exhausted their benefits.

Sen. Ron Wyden, an Oregon Democrat who heads the Senate Finance Committee, called efforts to eliminate improved unemployment benefits “deeply concerning.”

“Improved unemployment benefits have helped save the economy by ensuring that millions of families can pay rent and shop for groceries during this crisis,” he said in a statement Friday. “Cutting all benefits when millions of workers have not yet been able to return to work could cause enormous financial hardship and sabotage our economic recovery. “

“Study after study has shown that improving unemployment benefits has not prevented workers from returning to work, and other factors are at play here, such as the lack of childcare services for millions of women and lingering concerns about the virus. ”

Employees’ desire to return also seems to vary depending on the sector. “[T]he employment report shows a sharp increase in leisure and hospitality jobs, suggesting that ‘generous’ unemployment insurance is not a barrier to working in these industries, ”said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a think tank focused on the impact of budget and tax issues on inequality and poverty.