![[US] 2 million affected by states ending unemployment benefits early](http://gpa.net/cdn/shop/articles/bigstock-American-Flag-Or-United-States-358584962_1200x.jpg?v=1621324280)
At least sixteen states, all led by Republican governors, are withdrawing from pandemic-era unemployment programmes and giving up billions of dollars in federal funds that would otherwise flow to out-of-work residents. CNBC has all the key information about the states’ decisions and what is at stake.
As of May 13, the withdrawing states included Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah and Wyoming. Montana was the first state to announce its withdrawal, on May 4. (Link via original reporting)
The American Rescue Plan made these federal programs available until Labor Day, on September 6. These states are ending their participation at least two months early, withdrawing anywhere from June 12 to July 10 (the dates vary by state.) The governors’ decisions will reduce or entirely cut off benefits to nearly 2 million Americans.
According to Andrew Stettner - a senior fellow at the Century Foundation - around $11 billion of total funding is at stake.
Affected Programmes
States are withdrawing from programmes enacted by the CARES Act in March 2020. Together, the programs raised the amount of weekly aid, extended its duration and offered funds to workers who don’t typically qualify for state benefits.
How benefits will change
* States will no longer issue an extra $300 a week to workers.
* Those receiving state benefits will continue to get that aid, which generally amounts to half their pre-layoff wages. The average person received $350 a week in state benefits in March, according to the Labor Department.
(Benefits vary widely by state. Among opt-out states, for example, they ranged from $195 a week in Mississippi to $480 in North Dakota.)
* Certain workers won’t just get a benefit cut, they will entirely lose aid.
* Those groups include the long-term unemployed (who’ve exhausted their maximum allotment of state benefits) as well as gig workers, the self-employed, freelancers and others collecting what’s known as Pandemic Unemployment Assistance.
* This is the case in most - but not all - the states in question. In Arizona, for example, residents are only losing access to the $300.
Governors have pointed to labour shortages as the driver of their decisions to opt out of federal funding. They claim enhanced unemployment benefits offer an incentive for people to stay home and not look for jobs, leaving businesses struggling to fill open positions.
Missouri Governor Mike Parson said, “While these benefits provided supplementary financial assistance during the height of COVID-19, they were intended to be temporary, and their continuation has instead worsened the workforce issues we are facing.”
Evidence to support labour shortages
According to economists, it is hard to pinpoint the answer with available data but evidence suggests labour shortages are occurring, at least in some areas and sectors.
Daniel Zhao - senior economist at job and recruitment site Glassdoor - said the most compelling evidence is twofold.
On May 11, the Bureau of Labor Statistics reported that job openings had hit a record high in March. However, the US economy added only 266,000 job payrolls in April, far fewer than the 1 million expected.
Essentially there is strong demand for labour, as the economy reopens, but no commensurate flood of workers onto payrolls.
Shortages are most pronounced in industries like leisure and hospitality, which includes food services and restaurants. This is where most anecdotes of shortages among business owners seem to originate and where companies like McDonald’s and Chipotle are raising wages and offering bonuses to attract workers, Mr Zhao said.
According to a tweet from Peter Ganong - an assistant professor of public policy at the University of Chicago - some states are likely to be experiencing more of a labour crunch more than others. In Montana, for example, the labour market appears to be close to its pre-COVID status, unlike the rest of the US.
Many (but not all) states opting out of federal benefits have unemployment rates below the national average of 6.1 per cent. (For context, the national rate is still almost double its 3.5 per cent pre-pandemic level.)
Are unemployment benefits to blame?
Unemployment benefits could play a small role, economists said. Research suggests higher benefits reduce job-search intensity which was not a problem earlier in the pandemic when jobs were scarce. It is harder to say to what extent they are a factor now.
The real contributing factors
COVID-19 - not unemployment benefits - is still most likely to be the primary issue, according to labour experts. New daily infections, while falling, remain in the tens of thousands. And less than half (46 per cent) of American adults are fully vaccinated, according to the Centers for Disease Control and Prevention. (The share, which includes seniors, is lower among the working population.)
Additionally, until very recently vaccines were not made widely available. Workers need two to six weeks for full efficacy of the regimen, this means many cannot safely return to work until June, Diane Swonk - chief economist at Grant Thornton - said.
There are other pandemic-era contributors, including erratic school re-openings, child-care duties and a dearth of the after-school programs that largely help low-income parents. Many baby boomers opted to retire early and may not rejoin the labour force, reducing the overall labour supply.
The labour-shortage discussion is also often divorced from the issue of wages and hours. Workers may want to work but not at prevailing wages or on erratic or part-time schedules.
It may also be unrealistic to expect workers to take a job at the same speed at which jobs are being posted. Labour supply typically takes longer to respond than demand, Mr Zhao said.
“I don’t think it’s possible to quantify how much each factor contributes to labour shortages,” he explained. “There are so many different headwinds blowing at the same time.”
Further, the very states opting out of federal unemployment funding may dilute some demand for businesses - and the need for additional workers - if the withdrawal of this financial support contributes to less spending at the local level.
Source: CNBC
(Links via original reporting)
At least sixteen states, all led by Republican governors, are withdrawing from pandemic-era unemployment programmes and giving up billions of dollars in federal funds that would otherwise flow to out-of-work residents. CNBC has all the key information about the states’ decisions and what is at stake.
As of May 13, the withdrawing states included Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah and Wyoming. Montana was the first state to announce its withdrawal, on May 4. (Link via original reporting)
The American Rescue Plan made these federal programs available until Labor Day, on September 6. These states are ending their participation at least two months early, withdrawing anywhere from June 12 to July 10 (the dates vary by state.) The governors’ decisions will reduce or entirely cut off benefits to nearly 2 million Americans.
According to Andrew Stettner - a senior fellow at the Century Foundation - around $11 billion of total funding is at stake.
Affected Programmes
States are withdrawing from programmes enacted by the CARES Act in March 2020. Together, the programs raised the amount of weekly aid, extended its duration and offered funds to workers who don’t typically qualify for state benefits.
How benefits will change
* States will no longer issue an extra $300 a week to workers.
* Those receiving state benefits will continue to get that aid, which generally amounts to half their pre-layoff wages. The average person received $350 a week in state benefits in March, according to the Labor Department.
(Benefits vary widely by state. Among opt-out states, for example, they ranged from $195 a week in Mississippi to $480 in North Dakota.)
* Certain workers won’t just get a benefit cut, they will entirely lose aid.
* Those groups include the long-term unemployed (who’ve exhausted their maximum allotment of state benefits) as well as gig workers, the self-employed, freelancers and others collecting what’s known as Pandemic Unemployment Assistance.
* This is the case in most - but not all - the states in question. In Arizona, for example, residents are only losing access to the $300.
Governors have pointed to labour shortages as the driver of their decisions to opt out of federal funding. They claim enhanced unemployment benefits offer an incentive for people to stay home and not look for jobs, leaving businesses struggling to fill open positions.
Missouri Governor Mike Parson said, “While these benefits provided supplementary financial assistance during the height of COVID-19, they were intended to be temporary, and their continuation has instead worsened the workforce issues we are facing.”
Evidence to support labour shortages
According to economists, it is hard to pinpoint the answer with available data but evidence suggests labour shortages are occurring, at least in some areas and sectors.
Daniel Zhao - senior economist at job and recruitment site Glassdoor - said the most compelling evidence is twofold.
On May 11, the Bureau of Labor Statistics reported that job openings had hit a record high in March. However, the US economy added only 266,000 job payrolls in April, far fewer than the 1 million expected.
Essentially there is strong demand for labour, as the economy reopens, but no commensurate flood of workers onto payrolls.
Shortages are most pronounced in industries like leisure and hospitality, which includes food services and restaurants. This is where most anecdotes of shortages among business owners seem to originate and where companies like McDonald’s and Chipotle are raising wages and offering bonuses to attract workers, Mr Zhao said.
According to a tweet from Peter Ganong - an assistant professor of public policy at the University of Chicago - some states are likely to be experiencing more of a labour crunch more than others. In Montana, for example, the labour market appears to be close to its pre-COVID status, unlike the rest of the US.
Many (but not all) states opting out of federal benefits have unemployment rates below the national average of 6.1 per cent. (For context, the national rate is still almost double its 3.5 per cent pre-pandemic level.)
Are unemployment benefits to blame?
Unemployment benefits could play a small role, economists said. Research suggests higher benefits reduce job-search intensity which was not a problem earlier in the pandemic when jobs were scarce. It is harder to say to what extent they are a factor now.
The real contributing factors
COVID-19 - not unemployment benefits - is still most likely to be the primary issue, according to labour experts. New daily infections, while falling, remain in the tens of thousands. And less than half (46 per cent) of American adults are fully vaccinated, according to the Centers for Disease Control and Prevention. (The share, which includes seniors, is lower among the working population.)
Additionally, until very recently vaccines were not made widely available. Workers need two to six weeks for full efficacy of the regimen, this means many cannot safely return to work until June, Diane Swonk - chief economist at Grant Thornton - said.
There are other pandemic-era contributors, including erratic school re-openings, child-care duties and a dearth of the after-school programs that largely help low-income parents. Many baby boomers opted to retire early and may not rejoin the labour force, reducing the overall labour supply.
The labour-shortage discussion is also often divorced from the issue of wages and hours. Workers may want to work but not at prevailing wages or on erratic or part-time schedules.
It may also be unrealistic to expect workers to take a job at the same speed at which jobs are being posted. Labour supply typically takes longer to respond than demand, Mr Zhao said.
“I don’t think it’s possible to quantify how much each factor contributes to labour shortages,” he explained. “There are so many different headwinds blowing at the same time.”
Further, the very states opting out of federal unemployment funding may dilute some demand for businesses - and the need for additional workers - if the withdrawal of this financial support contributes to less spending at the local level.
Source: CNBC
(Links via original reporting)
