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News: States Cutting Unemployment Benefits Over Labor Shortages

Jobs grew roughly 25% of expectations, leading to dramatic action at the state level.

Author Justin Cupler
Contributing Writer at Tally
May 14, 2021

When former President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law in March 2020, it came with a $600-weekly increase for folks on unemployment. That amount was later lowered to $300 in the second COVID-19 stimulus bill in December 2020.

When President Biden took office, one of his first acts was to pass the third stimulus bill for $1.9 trillion. The bill extended the $300-per-week unemployment benefit through September 6, 2021.

With the U.S. economy amid economic recovery and 6.1% of Americans out of work, it might be logical to think businesses would hire open positions quickly. However, companies are struggling to find workers to fill the empty slots. 

As a result, some state governors have announced plans to pull out of the federal unemployment assistance, cutting off the weekly $300 increase and other benefits. 

What States are Cutting Benefits?

As of May 13, 2021, thirteen states have announced plans to cut the additional $300-per-week unemployment benefit:

  • Alabama: Governor Kay Ivey said on Monday, May 10, that the state plans to cease the extra $300 in payments starting June 19. 
  • Arkansas: On May 7, Governor Asa Hutchinson announced the added benefit would stop on June 26.
  • Idaho: Governor Brad Little has plans to cancel the state’s program on June 19.
  • Iowa: June 12 is when Governor Kim Reynolds will end the extra $300 in unemployment benefits. 
  • Mississippi: Governor Tate Reeves said on Monday, May 10, his state would pull out of the federal unemployment boost starting June 12. 
  • Missouri: On Tuesday, May 11, Missouri Governor Mike Parson said his state would end its participation in the federally boosted jobless benefits on June 12. 
  • Montana: June 27 is the date when jobless Montanans will lose the extra $300 per week on their unemployment benefits. Governor Greg Gianforte did announce a one-time $1,200 bonus payment for unemployed residents who return to work. 
  • South Carolina: Governor Henry McMaster will allow the expanded jobless benefits to run through June.
  • North Dakota: Governor Doug Burgum announced plans to cease its participation in the jobless benefits boost starting on June 19. 
  • South Dakota: On June 26, Governor Kristi Noem will end the state’s participation in the federal unemployment program.
  • Tennessee: Governor Bill Lee is allowing unemployed residents to collect the expanded benefits until July 3. 
  • Utah: On June 26, Utah will withdraw from federal unemployment aid, said, Governor Spencer Cox.
  • Wyoming: Governor Mark Gordon stated Wyoming would end the enhanced benefits but did not provide a timeline.

Why are They Ending Benefits?

If you’ve been to a local fast-food restaurant or a retail store, you may notice “Now Hiring” signs aplenty but employees a few. This is due in part to a massive labor shortage, as many people who lost their job due to the pandemic haven’t returned to work. 

The governors who announced plans to stop the extra $300-per-week payments theorize the extra money is a deterrent to returning to work. The U.S. Chamber of Commerce concurred,  “We need a comprehensive approach to dealing with our workforce issues and the very real threat unfilled positions poses to our economic recovery from the pandemic. One step policymakers should take now is ending the $300 weekly supplemental unemployment benefit.” 

The Chamber also estimates 25% of unemployed Americans are now earning more on unemployment than they did while working. 

These state actions all stem from a disappointing April 2021 jobs report. Economists expected to see roughly a million new jobs added in April. Instead, only 266,000 new jobs were created. That massive gap between expectations and reality is partially what fueled the fire for cutting the extra unemployment benefits. 

Other theories as to why workers aren’t returning to the workforce, include: 

  • The New York Times pointed toward the health risks associated with COVID-19 at work and the extra pay as key reasons. 
  • A Census Household Pulse survey found that 6.3 million workers couldn’t return to work because they were caring for children, and another 2.1 million cited caring for an older person in their home. 
  • Saru Jayaraman, president of the minimum-wage advocacy group One Fair Wage, says it’s a wage issue. Insider also noted this as a potential issue, as out-of-work Americans continue to bring in unemployment benefits while holding out for higher wages. 

Who is Impacted?

It’s not only the general unemployed population who this benefits cut will impact. It will also impact the extended unemployed population — those who traditionally wouldn’t have qualified for unemployment before the CARES Act. 

This includes part-time workers, self-employed workers, freelancers, and independent contractors. The CARES Act gave them access to state unemployment benefits and the extra $300 per week.

Though there’s no consensus for why April’s jobs report was lackluster, federal and state legislation is interpreting the data and acting on it. As more of the population is vaccinated and some states choose to end their boosted federal unemployment benefits, time and data may prove one way or the other.