Add Arkansas, Mississippi to States Canceling Federal Unemployment Benefits

A growing number of GOP-led states have decided that increasing unemployment benefits is a problem.

Unemployed Americans living in some Republican-run states have a nasty surprise ahead. Governor Asa Hutchinson of Arkansas and Governor Tate Reeves of Mississippi have announced that their states will end the federally backed unemployment increase rather than allow it to expire as scheduled on September 4, 2021.

Arkansas and Mississippi join Alabama, Idaho, Iowa, Missouri, Montana, North Dakota, South Carolina, Tennessee and Wyoming to cut federal payments by $ 300 per week . The $ 300 “boost” was added to state unemployment benefits in an effort to help millions of unemployed Americans weather the worst of the pandemic. And while Indiana Gov. Eric Holcomb weighs in on taking away unemployment benefits from his state, governors who have already announced their decisions are giving beneficiaries a few weeks to make other plans.

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Some lawmakers believe cutting benefits will be good for the job market

As more Americans are vaccinated and businesses reopen, Republicans worry about a labor shortage. The average American receives $ 387 per week in unemployment benefits from their state, according to the Center on Budget and Policy Priorities. With the boost of $ 300 from the federal government, that amount is $ 687 per week – the equivalent of $ 17.17 an hour, based on a 40-hour work week.

The problem with the unemployed receiving $ 17.17 an hour, according to Republican leaders, is that many Americans earn more by collecting unemployment than they can by working full time.

For example, an employee working 40 hours a week at $ 17.17 an hour (the current average premium premium) can earn $ 35,714 a year. In Montana, where the minimum wage is expected to hit $ 8.75 an hour in 2021, minimum wage workers in full-time jobs earn $ 18,200 per year.

The position of lawmakers withdrawing from the federally backed program is that employees will be forced back into the workforce when their incentive to stay at home is removed.

Potential reality

Federal Reserve Chairman Jerome Powell told a press conference last week that it was not clear whether the increase in unemployment benefits was the cause of the labor shortage . What if the perceived labor shortage is caused by other factors, such as more people starting their own businesses or deciding to train for new jobs? It is possible that the experiences surrounding COVID-19 have led people in a new direction and we have just seen the results.

Unemployment benefits paid by the federal government have boosted spending and are contributing to the economic recovery, according to Andrew Stettner, senior researcher at the Century Foundation. Stettner calls it “short-sighted” that a state should sacrifice the economic stimulus of this increased spending on anecdotes of labor shortages, coming from relatively few employers.

Other concerns about the sudden reduction in benefits relate to the number of working parents who will have to scramble for affordable child care. Again, using Montana as a model, the average cost of child care for a child is over $ 9,500 per year, or more than half of the pre-tax income of a minimum wage employee. Although Montana plans to offer a one-time bonus of $ 1,200 to those who return to work, that money will do little to cover child care costs on an ongoing basis.

All of this back and forth does not provide straightforward answers for those who are struggling to put money in their bank accounts or pay their bills. The best we can hope for is that we all find a way to come together and achieve our long term goals.