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The state-level action mirrors a national debate over whether expanded jobless benefits are driving a workforce shortage.
Republican governors in at least two states—Montana and South Carolina—moved this week to end expanded unemployment benefits adopted as part of the nation's pandemic response, including a $300 weekly supplement financed by the federal government.
Both governors cited workforce shortages as part of their rationale. Montana Gov. Greg Gianforte also said the state would offer a $1,200 bonus to some people who go off unemployment and return to work. The moves came ahead of a lackluster jobs report released on Friday.
Meanwhile, critics say it's too soon to cut off the benefit programs and argue that employers who are having difficulties finding workers are simply offering wages that are too low.
The actions by the governors mirror a debate heating up in Washington, as Republican members of Congress spar with Democrats and the White House over whether benefits provided to Americans under the most recent round of coronavirus relief legislation, enacted in March, are creating a disincentive for people to look for work.
Those disagreements fall within an even broader battle over the role and scope of government as the Biden administration pushes for a broad expansion of domestic programs and spending as part of an infrastructure proposal and other measures, and Republicans balk at the cost and raise concerns about government overreach.
National Debate Over Workforce Shortages
The Labor Department said Friday that the nation's nonfarm payroll employment increased by just 266,000 in April, while unemployment remained about even with March at around 6.1%. Some economists had predicted jobs gains of 1 million or more, as climbing vaccination rates stir hope for a rebound in commerce and travel.
“This is a stunning economic setback, and unequivocal proof that President Biden is sabotaging our jobs recovery with promises of higher taxes and regulation," U.S. Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, said of the jobs report.
“The White House is also in denial that many businesses—both small and large—can’t find the workers they need," he added, charging that "Democrats are paying" many jobless Americans "more to stay home than to return to work."
President Biden defended his administration's strategy and dismissed the notion that enhanced unemployment benefits were keeping people out of the workplace. "We're still digging out of an economic collapse that cost us 22 million jobs," he said during a news conference.
"There’s more evidence that our economy is moving in the right direction, but it’s clear we have a long way to go," he added.
Heidi Shierholz, who leads the policy team at the left-leaning Economic Policy Institute, suggested in a commentary this week that hand-wringing over labor shortages is not uncommon. "In good times and bad, there is always a chorus of employers who claim they can’t find the employees they need," she wrote.
"Employers post their too-low wages, can’t find workers to fill jobs at that pay level, and claim they’re facing a labor shortage," Shierholz added. "Given the ubiquity of this dynamic, I often suggest that whenever anyone says, 'I can’t find the workers I need,' she should really add, 'at the wages I want to pay.'"
But a report the National Federation of Independent Businesses released this week indicates that, for small businesses at least, the worker shortage at the moment is particularly acute.
The group said a survey of about 1,500 of its members found that 44% of all small business owners had job openings they could not fill in April—that's 22 points higher than a 48-year historical average, and two points higher than March.
“The tight labor market is the biggest concern for small businesses who are competing with various factors such as supplemental unemployment benefits, child care and in-person school restrictions, and the virus,” NFIB economist Bill Dunkelberg said in a statement.
“Many small business owners who are trying to hire are finding themselves unsuccessful and are having to delay the hiring or offer higher wages," he added. "Some owners are offering ‘show up’ bonuses for workers who agree to take the job and actually show up for work.”
Governors Move to End Benefits
It's in this context that South Carolina Gov. Henry McMaster, in a May 6 letter, ordered the state's Department of Employment and Workforce director to end the state's participation in all federal, pandemic-related unemployment benefit programs by June 30. McMaster said that businesses "now face an unprecedented labor shortage."
“This labor shortage is being created in large part by the supplemental unemployment payments that the federal government provides claimants on top of their state unemployment benefits," he added. "In many instances, these payments are greater than the worker’s previous pay checks."
South Carolina's minimum wage is $7.25 an hour, in line with the federal pay floor.
McMaster specifically pointed to hospitality and tourism as sectors short on employees.
U.S. Labor Department estimates for May 2020 show that the median hourly wage for hotel and motel clerks in the state was $11 an hour, and that average yearly pay for those jobs was $23,400 a year. For dishwashers those figures were $9.97 and $21,340, respectively.
McMaster's directive will end a slate of federal pandemic-era unemployment programs, including Federal Pandemic Unemployment Compensation, which provides the $300 extra weekly payments on top of state benefits.
Some other programs that will stop include: Pandemic Unemployment Assistance, which is a temporary federal program for people not typically eligible for benefits, such as independent contractors or "gig workers," and Pandemic Emergency Unemployment Compensation, which offers added weeks of federal payments for people who use up their initial state and federal benefits.
South Carolina's average weekly unemployment benefit is about $236 and the maximum benefit is $326. The maximum state timeframe for benefits is 20 weeks.
Similar changes in Montana
The changes to unemployment programs Gianforte announced in Montana align with those in South Carolina. Gianforte moved first, making his announcement on Tuesday. Montana will end its participation in federal pandemic-related unemployment benefit programs and transition to its pre-pandemic system by the end of June.
“Montana is open for business again, but I hear from too many employers throughout our state who can’t find workers. Nearly every sector in our economy faces a labor shortage,” said Gianforte. “Incentives matter,” he added, “and the vast expansion of federal unemployment benefits is now doing more harm than good."
The governor said the state would pay the $1,200 back-to-work bonus using federal money available under the most recent coronavirus relief bill—the American Rescue Plan.
Rebecca Dixon, executive director of the National Employment Law Project, in a statement called Gianforte's move "cruel" and "ill-informed." She argued that Montana’s relatively low overall unemployment rate of around 3.8% masks pockets of much higher joblessness around the state in some counties and up to 13% among some tribal communities.
Dixon also criticized the bonus program as misguided, noting that it is capped at 12,500 people and making a case that it could lure some people back into low grade jobs.
"Workers will eagerly return to good jobs that provide family-sustaining wages, safe working conditions, and adequate benefits," she said. "The biggest hindrance to economic recovery is a combination of substandard jobs and inadequate work supports such as childcare."
Bill Lucia is a senior editor for Route Fifty and is based in Olympia, Washington.