What states are ending federal unemployment in June?

Last week, the Governors of South Carolina and Montana announced that they would be ending additional unemployment benefits to beneficiaries by the end of June. Both leaders cited labor shortages occurring in their states and quick economic recovery as justification. 

In Montana, Governor Greg Gianforte, also announced that the state would use funds allocated through American Rescue Plan to pay some workers a “Return-to-work Bonus” to incentivize reentry into the workforce. The bonus is worth $1,200 and the Department of Labor in Montana will contact those who are eligible to participate. To receive the funds one must “accept employment and complete at least four paid weeks of work.”

Similarly, in South Carolina, Governor Henry McMaster stated that the unemployment benefits were “intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic” and has instead “turned into a dangerous federal entitlement.” While in Montana, the state has more or less reached the pre-pandemic unemployment rate, South Carolina remains above it.

Neither governor mentioned wages, poor working conditions, familial obligations, or fears of the virus as a possible reason for not reentering the workforce.

What other states have followed? 

Since the announcement of Govs. Gianforte and McMaster, state leaders in Alabama, Arkansas, Idaho, Iowa, Mississippi, Missouri, North Dakota, Tennessee, Utah, and Wyoming have also announced they will be stopping the payments.

While announcing these changes, many leaders cited slow re-entry into the workforce and challenges from the private sector in hiring workers.

Utah is the latest state to announce the end of the extra payments. A statement released by the governor’s office said “With the nation’s lowest unemployment rate at 2.9% and plenty of good paying jobs available today, it makes sense to transition away from these extra benefits that were never intended to be permanent. The market should not be competing with government for workers.”

All of the governors who have announced these changes are Republicans and there is a clear ideological motivation. Gov. Brad Little of Idaho stated that his decision was “based on a fundamental conservative principle — we do not want people on unemployment. We want people working.”

Gov Kay Ivie of Alabama  relayed messages she has received from the private sector by saying “we are hearing from more and more business owners and employers that it is increasingly difficult to find workers to fill available jobs, even though job openings are abundant.” Arguing that as her state reaches the pre-pandemic, these benefits contribute to “a labor shortage that is compromising the continuation of our economic recovery.”

However, economists have not been quick to attribute labor shortages to these extended benefits. Many have argued that the current situation cannot be explained through the lens of previous recessions and that there are real societal shifts that have taken place that may create friction as states try to get people back to work.

In an interview with CNBC, Ioana Marinescu, an assistant professor of economics at the University of Pennsylvania explained that the decision could backfire, arguing that the “The $300 benefits also help stimulate the economy. Taking them away at a national level may lead to less household spending — potentially reducing demand for business’ goods and undercutting the need to hire more workers.” Dr. Marinescu does acknowledge that there will be a point where the benefit should end, but that there is not enough information yet to make that choice.

When will each state end benefits?

12 June

19 June 2021

26 June 2021

27 June 2021

30 June 2021

3 July 2021