Amid Labor Shortages, Some States Opt Out of Enhanced Jobless Benefits

Expanded unemployment payments make hiring harder, business owners say

Stephen Miller, CEBS By Stephen Miller, CEBS May 12, 2021

Several U.S. states are taking actions to encourage the unemployed to find work amid labor shortages, including opting out of the supplemental $300 federal unemployment benefit for the jobless in their states and reinstating requirements that those receiving unemployment benefits show they are actively looking for work.

Montana was the first state to announce it was ending federally subsidized $300-a-week expanded unemployment benefits. It will instead offer a one-time $1,200 bonus for Montanans who re-enter the workforce, the Montana Free Press reported.

"Montana is open for business again, but I hear from too many employers throughout our state who can't find workers," Montana Gov. Greg Gianforte, a Republican, announced May 4 in a statement. "Incentives matter, and the vast expansion of federal unemployment benefits is now doing more harm than good. We need to incentivize Montanans to re-enter the workforce."

In Montana, there are now more weekly job postings than there were before the pandemic, the state labor department said in a brochure explaining the shift in benefits, and the state unemployment rate is nearly back to pre-pandemic lows at 3.8 percent.

Montana unemployment recipients can get between $151 and $510 weekly from the state's program, The Washington Post reported, "meaning people claiming unemployment benefits from the state were getting between $451 and $810 weekly because of the federal boost. The minimum wage in the state is $8.65 per hour, adding up to $346 per week for a full-time job."

On May 7, just days after Montana's announcement, South Carolina Gov. Henry McMaster, a Republican, said his state also will be ending federal pandemic unemployment benefits for its residents. "What was intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic … [is] incentivizing and paying workers to stay at home rather than encouraging them to return to the workplace," McMaster said.

The following week, the Republican governors of Alabama, Arkansas and Mississippi also said they would forego federal funding for the $300-a-week supplement to unemployment insurance. [Update: subsequently, over a dozen states said they were ceasing the $300 weekly extra federal unemployment benefit early, while also ending jobless benefits to workers who have exhausted their state-level benefits.]

Florida Gov. Ron DeSantis, a Republican, said he plans to reinstate a requirement that people in the unemployment system will have to start showing how they looked for work once an executive order waiving a weekly work-search requirement ends May 29, the Tampa Bay Times reported.

"We suspended that last year at this time because, quite frankly, there weren't jobs," DeSantis said, whereas now there is "a surplus of jobs" in the state, and particularly in the restaurant, lodging and hospitality sectors.

Shortly afterward, Republican and Democratic governors of several other states said they were also reinstating looking-for-work requirements in order to receive unemployment benefits, including Arizona, Indiana, Vermont and Virginia.

Hiring Challenges

Nationwide, many employers say they can't hire because extended, expanded federal and state unemployment insurance (UI) payments have caused potential job candidates to drop out of the labor force. Meanwhile, employers' UI taxes are also going up.

"It does seem like a double hit," said Joe Kane, executive vice president at Total Management Solutions Inc., which offers severance management services.

During an April webinar by HR advisory firm Buck, Kane pointed out that the American Rescue Plan Act provides an additional 29 weeks of unemployment benefits to people who exhaust their regular state benefits—with $300 per week supplemental coverage—into September 2021, following earlier federal UI supplemental payments under prior legislation.

"There are circumstances where workers can claim up to 99 weeks of unemployment benefits," Kane said, with $750 per week in benefits on average, "and higher in some states."

On May 7, the same day that the Bureau of Labor Statistics announced hiring activity fell significantly in April, the U.S. Chamber of Commerce called for ending the $300 weekly supplemental unemployment benefit to address labor shortages. 

"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," said Neil Bradley, the chamber's executive vice president and chief policy officer. "Based on the chamber's analysis, the $300 benefit results in approximately one in four recipients taking home more in unemployment than they earned working."

According to The Wall Street Journal, "Proponents of the supplemental unemployment benefits have said the measures remain necessary to support out-of-work people still struggling with COVID-19's economic fallout, and give unemployed workers time to search for better-paying jobs."

For more information, SHRM Online has gathered the following articles.

DOL Supports Enhanced Benefits

U.S. Labor Secretary Marty Walsh was disappointed by Gov. Gianforte's decision, according to a statement by U.S. Department of Labor (DOL) spokesman Michael Trupo.

"Choosing to eliminate these critical benefits will have the greatest impact on the most vulnerable," Trupo said, adding that workers who are at a higher risk from contracting COVID-19 or who live with a vulnerable family member must now "make an impossible choice" between their health and their economic security.

The DOL has not seen evidence that enhanced unemployment benefits are keeping people out of the labor force, Trupo said.

(The Washington Post)

Employment Growth Slows Sharply Amid Labor Shortages

The U.S. Department of Labor's closely watched employment report on May 7, which showed a plunge in temporary help jobs—a harbinger for future hiring—as well as decreases in manufacturing and retail employment, could sharpen criticism of generous unemployment benefits.

The enhanced jobless benefits, including a government-funded $300 weekly supplement, pay more than most minimum-wage jobs. The unemployment benefits were extended as part of a massive $1.9 trillion COVID-19 pandemic relief package approved in March.

"Many will view the poor returns from last month as confirmation that enhanced unemployment benefits are curtailing labor supply," said Curt Long, chief economist at the National Association of Federally Insured Credit Unions.

The moderate pace of hiring could last at least until September when the enhanced unemployment benefits run out.


Waiting for the Right Job

In a red-hot economy coming out of a pandemic and lockdowns, with unemployment still far higher than it was pre-pandemic, businesses can't find enough people to hire.

Surveys suggest why some can't or won't go back to work. Millions of adults say they aren't working for fear of getting or spreading COVID-19. Businesses are reopening ahead of schools, leaving some parents without child care. Many people are receiving more in unemployment benefits than they would earn in the available jobs.

A University of Chicago study found 42 percent of those on benefits receive more than they did at their prior jobs, and the share is higher when factoring in temporary health insurance offered through relief bills.

Lorne Zaman lost his job as a concert promoter in Los Angeles more than a year ago. He hasn't worked since, supporting himself on savings, stimulus checks and unemployment benefits, which have been about $750 a week in recent months.

"I really enjoyed what I did," he said. "If the government is going to pay you to stay home, you're going to do that unless that job you really want comes along."

(The Wall Street Journal)

Restaurants Can't Find Staff

"We're only open four days right now and we really can't see us opening anymore until we feel safe and confident that we have the amount of staff to man the tables," said Bill Castro, owner of El Meson in Dayton, Ohio, a restaurant serving Central and South American dishes, He has people applying but then many don't show up for interviews, which he believes is due to unemployment checks that have been extended to September.

"I have people that I've offered to come back, and they almost say, 'I'm not really interested until the money that I'm getting runs out,' " he said.

Policy Matters Ohio, a progressive think tank, said in a statement that the unemployment benefits "help hundreds of thousands of Ohioans stay afloat, but it's not nearly enough," arguing that Congress has extended unemployment benefits for much longer in previous recessions.

(Dayton Daily News)

Signing Bonuses and Benefits

Illinois-based Portillo's Hot Dogs LLC boosted hourly wages in markets including Arizona, Michigan and Florida, and is offering $250 hiring bonuses to attract job applicants.

Fast-food operators, including owners of Jimmy John's Gourmet Sandwiches restaurants, are offering signing bonuses for recruits. Chipotle Mexican Grill Inc. is offering free college tuition to employees who work at least 15 hours a week after four months on the job.

Taco Bell is giving paid family leave to company-store managers. McDonald's owners are assessing what pay and benefits its U.S. employees most want, to better pitch the Golden Arches as an employer.

Atlanta-based restaurant operator Daniel Halpern, who runs 50 TGI Friday's and other restaurants, recently increased hourly wages and is offering employees immediate pay. He said he is still short about 900 workers.

(The Wall Street Journal)



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