More Red States Slash Federal Unemployment Benefits

Adult woman looking for employment on her phone.
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At least 13 states, all with Republican governors, have announced they will cut off federally funded pandemic unemployment programs early, potentially impacting more than 1 million people who stand to lose more than $4 billion in benefits.

Key Takeaways

  • At least 13 states are withdrawing from federally funded unemployment programs early, potentially affecting more than 1 million people who stand to lose more than $4 billion.
  • The states, all led by Republican governors, will end the programs in June or July instead of when they expire in September.
  • The goal is to encourage people to return to work and fix an apparent shortage of workers.
  • Critics say the move will hurt those who are unemployed while doing little if anything to help the economy.

Since last week, Alabama, Arizona, Arkansas, Georgia, Iowa, Idaho, Mississippi, Missouri, Montana, North Dakota, South Carolina, Tennessee, and Wyoming have said they would withdraw from the programs in June or July, ahead of their Sept. 6 expiration date.

The special pandemic-triggered programs have not only provided those collecting unemployment with an extra $300 a week, but extended benefits to those who would otherwise not be eligible, including self-employed and gig workers. In some cases, the states withdrawing will offer one-time bonuses for returning workers instead.

The Republican governors are trying to get more people off the unemployment rolls and back into the labor force as some employers complain of a worker shortage. Even Democratic President Joe Biden has made it harder to collect unemployment benefits after government data showed the U.S. economy added just a fraction of the jobs economists had expected in April. The number of job openings reached a record high in March, and employers including Amazon and McDonald’s are hiking starting wages as they look to hire thousands.

“As we emerge from this pandemic, Georgians deserve to get back to normal—and today’s announced economic recovery plan will help more employees and businesses across our state do so,” Georgia Governor Brian Kemp said in a statement Thursday. The move is intended to “get more Georgians back to work in good-paying jobs,” he said.

Red Against Blue

So far the decisions have pitted red against blue with only Republican-led states withdrawing early. Advocates for the unemployed, and some progressive economists, have blasted the measure as harming workers hard hit by the pandemic’s economic downturn.

“Montana Governor Greg Gianforte’s move to abruptly end the state’s participation in the fully federally funded pandemic unemployment insurance programs is cruel, ill-informed, and will disproportionately harm women and Indigenous people, who are suffering higher rates of unemployment in the state,” Rebecca Dixon, executive director of the National Employment Law Project, wrote in a statement last week about the first state to withdraw. 

Cutting off benefits is economically short-sighted since the unemployment money was flowing into the states’ economies, Andrew Stettner, a senior fellow at The Century Foundation think tank, wrote in a commentary Thursday. Plus, there is little evidence of unemployment insurance holding back hiring, he said.

“To the extent that there are pockets of worker shortages, such as in the restaurant sector, it’s good news that employers are being forced to raise wages after months of reduced tips and high risks of infection from COVID-19 drove many away from these jobs,” Stettner wrote.

Between the Pandemic Unemployment Assistance program (which provides benefits for the self-employed and gig workers) and Pandemic Emergency Unemployment Compensation (which extends the time workers can claim benefits beyond the usual 26 weeks), 902,000 people are enrolled in the affected states. Another 467,000 are enrolled in state and other unemployment programs and would lose the $300 weekly supplement, data from the Department of Labor shows. 

In an analysis that only included 12 of the 13 states, Stettner said about 895,000 people would be cut off from benefits at a cost to workers of $4.66 billion.

More to Come?

The states dropping out account for only a small fraction of the nationwide unemployment rolls, but the Chamber of Commerce has called for an early end to the $300 supplement for all states, saying about one in four people take home more in benefits than they would have in their paycheck. 

All told, there were 12.5 million participants in the two main federal programs and another 3.8 million collecting regular state unemployment benefits with the $300 supplement, according to the latest figures from the Department of Labor.

Removing these people from the unemployment rolls is unlikely to help improve the labor supply by much, according to an analysis by Matt Bruenig, president of the People’s Policy Project published Wednesday. The 3.8 million only make up 2.3% of the workforce and 1.2% of the population, he said.

“Impoverishing people to flush them into jobs they are reluctant to accept is not good for those moved off the rolls, not good for those who are already in work, and especially not good for those who are still unable to find a job but now receive much lower or no benefits while they search,” Bruenig wrote.