A growing number of Republican governors will end state participation in pandemic-era federal unemployment programs amid concerns over a nationwide labor shortage.
The Biden administration extended the federal unemployment benefits to an additional $300 per week through Sept. 6, an effort to ease the transition as the economy slowly reopens.
In early May, Gov. Greg Gianforte (R-MT) made Montana the first state to announce their withdrawal from the program, saying the extra federal unemployment benefits were “doing more harm than good” and preventing potential employees from returning to work.
“Montana is open for business again, but I hear from too many employers throughout our state who can’t find workers,” Gianforte said in a statement. “Nearly every sector in our economy faces a labor shortage.”
Beginning June 27, unemployed workers in the state will no longer receive the $300 in weekly extra benefits. Instead, the state will launch a new program incentivizing unemployed workers who return to work by giving them a one-time $1,200 bonus after they have completed four weeks in their new jobs.
Days after Gianforte’s announcement, South Carolina’s Republican Gov. Henry McMaster said the state would make a similar move to leave the federal unemployment programs, citing an “unprecedented” workforce shortage across the state.
The state will opt out of the coronavirus pandemic assistance programs beginning June 30.
A startlingly weak jobs report for April, which was released last Friday by the Bureau of Labor Statistics, only served to buoy these concerns.
The jobs report fell far short of the expectations of economists, many of whom predicted the country would add as many as 1 million jobs. But the economy added only 266,000 jobs last month, despite reporting an increase of 916,000 in March and 468,000 in February.
Hours after the report was released, Arkansas’ Republican Gov. Asa Hutchinson directed the Division of Workforce Services to end the state’s participation in the enhanced unemployment benefits program after June 26.
Hutchinson said businesses in retail, restaurant and other sectors are trying to return to employment levels before the coronavirus pandemic, but “employees are as scarce today as jobs were a year ago.”
Just this week, the GOP governors of Alabama, Iowa, Mississippi and Missouri announced they would similarly end their states’ participation in the program, all citing concerns over labor shortages.
Missouri’s Gov. Mike Parson said he hopes cutting those benefits will drive people back to work and address a labor shortage in the state.
The effort to force unemployed workers back into the labor force isn't limited to GOP states. Several states have begun requiring those receiving unemployment benefits to show they are actively searching for work, a provision that was put on hold in March 2020 due to the coronavirus pandemic.
States reinstating the work-search requirement include Arizona, Maine, New Hampshire, North Carolina, Ohio, Rhode Island, South Carolina and Vermont. Lawmakers are advancing work-search legislation in Pennsylvania.
The Biden administration has continued to push back against claims that the added unemployment benefits are slowing economic growth.
Last Friday, treasury secretary Janet Yellen said she did not think the added unemployment benefits were "really a factor that's making a difference" in keeping people from returning to work.
Yellen said while the administration is certainly hearing from businesses that they are struggling to find workers, over 300,000 workers were added across the badly-impacted leisure and hospitality industry last month alone.
“But when we look across states, across sectors or across workers, if it were really the extra benefits that were holding back hiring … you would expect to see lower job finding rates,” she said. “In fact, what you see is the exact opposite.”
The president also addressed the concerns on Monday, saying companies that offer “fair wages and safe work environments” will likely be able to “find plenty of workers” as the economy reopens.
Still, Biden promised to clamp down on anyone who might be taking advantage of the enhanced unemployment benefits.
On Monday, the president directed the Labor Department to issue a directive to states in order to “reaffirm that individuals receiving UI may not continue to receive benefits if they turn down a suitable job due to a general, non-specific concern about COVID-19,” per the White House.
Labor experts say the shortage is not just about the $300 payment. Some unemployed people also have been reluctant to look for work because they fear catching the virus. Others have found new occupations rather than return to their old jobs. And many women, especially working mothers, have had to leave the workforce to care for children.
William Spriggs, an economist at Howard University and the chief economist for the AFL-CIO, said the issue isn’t as simple as the unemployed being able to receive more benefits. He says the economy has changed.
He said he didn’t think the job-search requirement is bad, but it won’t solve the labor shortage.
“Matching workers to employers isn’t as easy as people think, which is what some of these employers are finding out,” Spriggs said.
There might be a lot of jobs available, but in some cases they don’t fit for the unemployed with specialized work skills.
But it’s hard to deny that the country is facing a startling labor shortage across numerous sectors of the economy, with hospitality and retail being particularly hard-hit.
New figures released Tuesday from the Labor Department found that while U.S. employers posted a record number of available jobs in March, total job gains increased only modestly.
Job openings rose nearly 8%, to 8.1 million in March, the most on records dating back to December 2000, the government said. Yet overall hiring that month rose less than 4% to 6 million. The hiring number is a gross figure, while the government’s jobs report — which said 770,000 jobs were added in March — uses a net total. Tuesday’s report is known as the Job Openings and Labor Turnover Survey, or JOLTS.
Job postings rose in most industries, including restaurants, bars and hotels; manufacturing; construction; and retail. They fell in health care and transportation and warehousing.
The enormous number of openings will likely add fuel to the political dispute about whether the extra $300 in weekly federal unemployment aid is stopping Americans from returning to work.