Henry McMaster, the governor of South Carolina.
Eric Thayer / Bloomberg via Getty Images
At least two states will shortly discourage workers from pandemic-era programs that have expanded and increased unemployment benefits.
The governors of Montana and South Carolina announced this week that they will end their participation in federal programs in late June.
The American rescue plan is providing this aid until September 6th.
The programs that have existed since March last year pay funds to the long-term unemployed. Offer a weekly $ 300 supplement to the services. and help for the self-employed, gig workers and others who are normally not eligible for government assistance.
The state guidelines come when the US unemployment rate unexpectedly rose to 6.1% in April, the Bureau of Labor Statistics said on Friday.
The governors, both Republicans, accused the unemployment programs of keeping workers at home and creating labor shortages.
“What was meant to be short-term financial assistance to vulnerable and displaced people during the height of the pandemic has become a dangerous federal claim that encourages and pays workers to stay at home rather than encourage them to return to work. ” Henry McMaster, governor of South Carolina, said Thursday.
Support for loss of income
Montana and South Carolina will end programs on June 27 and June 30, respectively.
Some labor experts fear it will be the first of many early withdrawals among Republican-led states that may leave thousands with no income support to pay monthly bills.
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“It’s just a breathtakingly horrific economy,” said Heidi Shierholz, director of politics at the Economic Policy Institute and former chief economist at the Ministry of Labor from 2014 to 2017, in a tweet.
“It will cause tremendous suffering for those whose benefits are cut off and damage the state economies by turning away federal funds that provide tax assistance,” she added.
According to a CNBC analysis of the Department of Labor data, more than 150,000 people in Montana and South Carolina are poised to lose their benefits prematurely due to the cutoff. If there are at least 51,000, the benefits are reduced.
It is fanciful to believe that we can flip a switch and come back to [the] World we have left, given the detour we have taken.
Chief Economist at Grant Thornton
More than 16 million Americans are still collecting unemployment benefits – a number that is gradually falling but is far higher than the roughly 2 million before the pandemic.
Job report April
Business groups like the Chamber of Commerce pointed to the unexpectedly weak April job report as the reason for the termination of the unemployment programs. The US economy created 266,000 jobs in April, less than the expected 1 million.
The lobby group believes the extra $ 300 per week and other benefits are keeping people from looking for work.
“The disappointing job report makes it clear that the pay of people who do not work dampens the stronger labor market,” said the chamber on Friday.
Republicans in Congress used a similar argument when a weekly CARES Act unemployment benefit of $ 600 was introduced. At the time, economists found no evidence that the higher pay was preventing people from looking for work.
Unique Covid dynamic
Some economists consider it premature to criticize the current unemployment programs.
For one thing, companies may not pay wages high enough to attract workers to available jobs, they said.
The unique dynamics of the Covid recession – no additional unemployment benefits – may also be the bigger problem, the economists said.
“It really doesn’t help to hold the unemployed and worst-paid worker responsible for what happens,” said Diane Swonk, chief economist at Grant Thornton, on Twitter.
Parents may have to stay at home to look after children who are learning from home, childcare centers remain closed, and grandparents may no longer be able to help to the same extent as they used to, partly due to higher death rates among seniors. said Swonk.
Fear of the virus can also persist. Coronavirus infections are on the decline but remain high (more than 40,000 daily) and some long-distance Covid drivers with persistent symptoms may not be able to return to work just yet, Swonk added.
“It is fanciful to think that we can flip a switch and come back to [the] World that we have left in view of the detour, “she said.” Some of the changes brought about by the pandemic will be long-lasting. “
Montana Governor Greg Gianforte is replacing the unemployment programs with a one-time $ 1,200 return to work bonus. Employees are paid if they have had active unemployment entitlement as of May 4 and work four full weeks.
It doesn’t seem like South Carolina offers a similar incentive.