Brian Kemp, Georgia Governor.
Elijah Nouvelage | Bloomberg | Getty Images
More than 1 million Americans will lose early unemployment benefits as a result of states’ decision to cut off government aid to workers.
As of Thursday morning, at least 14 states, all led by Republican governors, had announced that they would end their participation in pandemic-era unemployment programs.
As a result, workers will no longer receive a weekly allowance of $ 300. Those who are not eligible for government benefits – such as the long-term unemployed, self-employed, and gig workers – will lose help entirely.
More from Personal Finance:
The new $ 1,400 stimulus checks include plus up and first payments
Many parents hold back high costs for childcare and a lack of paid vacation
Senators urge the FTC to protect itself from travel fraud
Some states cut benefits as early as June 12 and others not until July 3 – more than two months before they officially expire. The American rescue plan offers aid until September 6th.
The governors’ withdrawal will affect 895,000 workers in a dozen states, according to an analysis released Thursday by the Century Foundation, a left-wing think tank.
The states include Alabama, Arkansas, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, South Carolina, Tennessee, Utah, and Wyoming.
According to the report, they will forego $ 4.7 billion in cumulative support.
Georgia Governor Brian Kemp also announced that his state would be stepping out of federal programs Thursday morning after the Century Foundation’s analysis was released. South Dakota will also forego federal aid, Governor Kristi Noem said.
That would affect an additional 250,000 people, according to a CNBC analysis of Labor Department data.
The federal programs in question have been in force since the CARES law was passed in March 2020. Montana was the first state to deregister from federal aid on May 4.
“It’s absolutely a ripple effect,” said Andrew Stettner, Senior Fellow at The Century Foundation, of the state’s actions. “It is a very drastic step to withdraw from this type of program.”
State officials said they were ending early due to labor shortages in their respective states.
They claim that higher unemployment benefits result in workers staying at home instead of returning to work and companies struggling to fill vacancies.
It’s a similar argument that Republican lawmakers made last year when they opposed Democrats’ desire to extend a $ 600-a-week federal increase to state benefits.
The US created 266,000 jobs in April, down from the 1 million expected. Job vacancies also hit a record high in March, according to the Labor Department reported this week.
“Every small business owner and the workers who are currently working need more people,” Kemp said on Thursday. “It affects our productivity not just in Georgia, but across the country.”
Critics say that improved performance does not increase the shortage of available labor. Pandemic-era factors such as erratic school openings, childcare obligations, an ongoing viral threat, and previously relatively low vaccinations among working-age Americans have pushed people into the background, they said.
Rejecting federal funding for the unemployed also removes funds that might otherwise be pumped into the economy, potentially diluting demand and need for additional labor.
It may be unrealistic to expect Americans to take jobs at the rate at which companies post them, some economists say.
“Companies are a little ahead of their optimism when it comes to labor market conditions,” said Daniel Zhao, senior economist at Glassdoor, a job and recruiting site.
Labor supply usually reacts more slowly than demand, Zhao said. This is also the case in other economic sectors, as the US recently demonstrated with its semiconductor and wood shortages, he said.
In the opinion of the employee representatives, premature termination of benefits would also have disproportionate effects on minorities.
For example, 50% of the unemployed in South Carolina are black, as are 54% and 66% in Alabama and Mississippi – about three times the national average of 18%, according to the Century Foundation.
Some experts believe the U.S. Department of Labor may be able to prevent loss of benefits for the self-employed, gig workers, and others receiving help from the federal pandemic unemployment assistance program.
The US Department of Labor has legal authority to keep this aid going based on specific wording in the CARES Act that established the program. This emerges from a letter from the National Employment Law Project sent to Secretary of Labor Marty Walsh on Tuesday.
An official from the Department of Labor acknowledged receipt of the letter but declined to comment.