GOP Governors Nix $300-a-Week Jobless Pay, Stoking Debate
(Bloomberg) -- It started in Montana. The governor, desperate to fill record numbers of new weekly job postings, announced plans to scrap the payment of beefed-up federal unemployment benefits. Two days later, South Carolina followed. Then, in a rapid-fire rush, so too did about 20 other states, including Texas on Monday.
The governors -- all Republicans -- are inserting themselves in the middle of what has become the hottest debate surrounding the biggest economy in the world: Are the enhanced benefits, which can swell unemployed workers’ monthly checks to near or even above their pre-pandemic wages, discouraging millions of Americans from looking for jobs as Covid-19 restrictions ease?
To these governors and their supporters, the answer is an emphatic yes. The $300 weekly bonus payments need to be eliminated to keep the recovery humming along and to prevent labor shortages from further fanning inflation, they say.
Those on the other side -- led by the Biden administration -- point to other factors, including childcare challenges and ongoing health concerns, that are keeping many from rejoining the workforce. Those issues are especially acute among the lowest-paid workers, and cutting the added benefits prematurely, advocates say, will only exacerbate the deep inequalities between rich and poor that were exposed by the pandemic.
After more than a third of U.S. workers changed employers or lost their jobs during the pandemic, repealing the benefits won’t be a cure-all, economists and some local business owners say.
“The current disconnect between unemployment and the supply of labor comes down to a slew of factors -- not all mutually exclusive,” Sarah House, senior economist at Wells Fargo & Co., said in a note. “The mammoth challenge of restarting the economy and businesses stepping up hiring seemingly all at once has generated additional frictions.”
The latest weekly data on jobless claims, published Thursday, showed a decline in applications for state unemployment insurance to a fresh pandemic low, signaling the labor market continued to improve steadily.
Ending federal benefits early will also cut two additional programs established at the start of the pandemic. In the week ended May 1, there were over 6.6 million continuing claims for a program that provides jobless aid to those not traditionally eligible, and 5.1 million for assistance that extends the number of weeks one can qualify for benefits.
If all 27 Republican governors were to phase out pandemic benefits before they expire in September, 4.8 million workers could be cut off early, according to an analysis by the Century Foundation, a progressive research group. That includes 1.3 million in Texas alone.
In South Carolina, the number is about 166,000.
One of them is Gabrielle Weems. A single mother of two, she’s been collecting $475 each week from unemployment benefits, compared with $550 at her former mall administrative job.
She was laid off in March and has been looking for a job -- any job -- that matches the hours of her local day-care center since. She said she applies for several jobs a day.
“I haven’t had any call backs yet,” said Weems. “It’s like fishing with a small net. All rocks and no fish.”
If Weems doesn’t find a job by the time the extra benefits are phased out in South Carolina next month, she plans to work for the grocery-delivery app Instacart Inc. in order to make her own hours and support her family in the interim.
Hundreds of miles away in Tennessee, the Governors Club, a country club right outside of Nashville, is trying to shore up kitchen staff in its restaurant. Even after the state withdraws from the federal programs in early July, finding workers in the area will likely remain a challenge.
“We’re in a big, tough market,” said Jim Fitzsimmons, the club’s general manager. The expanded unemployment benefits are “just another hurdle” added to the challenge of hiring amid Covid-19 and increasing competition from new businesses, he said.
The club has raised the starting wages for kitchen workers to about $15 per hour and is deciding whether to offer cash bonuses for hourly workers who stay in their position, Fitzsimmons said. Tipped workers such as servers, who get a guaranteed base pay, seem to be easier to find and retain, he added.
Economists at Wells Fargo found in recent research that, on average, anyone who previously made less than about $34,000 per year would receive more collecting jobless benefits than returning to work. That affects primarily the lowest-paid workers in sectors such as food preparation and in-home elderly-care services.
If the extra jobless checks are part of what’s fueling recent wage increases, it’s a positive development, especially for the poorest in the country, White House economic adviser Bharat Ramamurti said in a Bloomberg TV interview this month.
Opponents like Florida Senator Marco Rubio, a Republican, say it’s keeping people at home.
“It’s not because people are lazy -- not accusing anyone of being lazy -- it’s because people are logical, because it’s logic that if you’re going to make close to or as much and in some cases more than what you do when you’re at work, you’ll go back to work when that expires,” Rubio said during a May 13 press conference.
Jeff Tenner, the owner of Soca Clothing boutique in Birmingham, Alabama, has a theory on why he can’t find college students, as he did before the pandemic: They’re collecting checks.
“Maybe a lot of those kids went on unemployment earlier in the pandemic and haven’t come off,” said Tenner, who’s only been able to hire high-school students in recent months. Soca has raised wages for all starting employees to $10 an hour, above the federal minimum wage requirement of $7.25.
Analysis from Bloomberg Economics: Tracking Wage Pressure in the U.S.
The surge in online shopping and deliveries is also driving labor mismatches, and wage increases at giant corporations are making it harder for local businesses to compete.
Amazon.com Inc. said last week that it will hire 75,000 logistics workers at an average of more than $17 an hour. On average, warehouse workers make nearly $33,000 annually, while cashiers earn about $24,000, according to Glassdoor Inc.
In parts of Montana, an inflow of remote workers during the pandemic has helped populate restaurants but also driven up house prices.
Hiring “seems to be getting more challenging as more people are moving here,” said Patrick Burns, manager at Markus Foods and the deli inside of it, Pig & Olive. “Home prices go up, and workers can’t find places to live in Whitefish.”
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