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Which states have abolished federal unemployment benefits and why?

Twenty-five states have ended or called to end federal pandemic-related unemployment benefits. Why did leaders in these states make the decision?

Which states have abolished federal unemployment benefits and why?
AMIRA KARAOUD REUTERS

Four states, Alaska, Iowa, Missouri, and Mississippi, ended the payments on 12 June, with more ending them throughout June and July. There a variety of reasons Republican governors and lawmakers have chosen to abolish the additional payments. The two main justifications for this decision are the progress states have made in lowering their unemployment rate and labor shortages seen throughout the states.

However, some economists warn that this action may be coming too soon. For example, Beurau of Labor Statistics data on unemployment claims from late May and early June shows they hit an all-time low since the pandemic began. But, Missouri is one of a handful of states where claims increased, meaning that while the economy is recovering, it has not fully stabilized.

Decreases in unemployment

The four states that have ended the additional benefits have seen declines in their unemployment rate compared to Spring 2020. However, none have reached the rate seen before the pandemic.

For example, in May 2020, Alaska’s unemployment rate reached eleven percent and has since declined to about 6.7 percent. While still up more than a point compared to pre-pandemic levels, the Commissioner of Alaska’s Department of Labor and Workforce Development stated that “As Alaska's economy opens up, employers are posting a wide range of job opportunities and workers are needed.”

Labor shortages

Montana and South Carolina were the states to announce they would be ending federal pandemic-related unemployment programs. Both governors and the majority of those who have followed say that action is needed to get people motivated to find work.

When Iowa Governor Kim Reynolds made the decision, she argued that “the overwhelming message we receive from employers these days is the lack of workforce that is adversely affecting their ability to recover from the pandemic.” To support Iowans in their job search, the state’s Workforce Development offices, located across the state, will provide career resources and tools. The Governor believes this is a first step in “helping Iowans find their next great job or new career pathway and helping employers find their next great employee.”

What will the impact of cutting these benefits be?

Until more states fully implement the move, and data on unemployment becomes available it is hard to tell what the impact will be. 

In May, the economy added more than half a million jobs, which some GOP members attribute to the decision to end federal benefits. However, for those who face unique barriers in reentering the workforce, such as child care responsibilities or concerns over their health, these policies could do more damage in the long-run by leaving households more dependent on other forms of government assistance.