21 States Cancel $300/Week Unemployment Benefits

I trust everyone reading this has heard by now that 21 state governors – all Republican – have set plans in motion to stop participating in the federal government’s supplemental unemployment benefits program, which provides an extra $300 a week to the jobless. The benefit cutoffs in most of these states will go into effect in June or early July.

The Republican governors and other officials claim the payments disincentivize workers to get back on the job. Most liberals, who never met a government handout they didn’t like, say workers are not returning to their jobs because: 1) they’re afraid of getting COVID 19, 2) they don’t have adequate childcare yet, 3) they’re caring for an elderly loved one at home, etc., etc.

Liberals also complain, perhaps rightly so, that eliminating the $300/wk. benefit negatively impacts traditionally lower income households. In other words, liberals maintain that the reason more Americans remain on unemployment is NOT because they are making more money staying home than going back to their jobs.

The Republican governors who are dropping the $300/wk. benefit strongly disagree. They say small and medium-sized businesses in their states are struggling mightily to find enough workers to staff back up to full capacity. So, which is it? Let’s look at some numbers.

First, the average American on unemployment receives $387 per week from their state, according to the Center on Budget and Policy Priorities. With the boost of $300 from the federal government, this number rises to $687 per week.

Based on a 40-hour workweek, this means the average unemployed American is getting the equivalent of $17.17 an hour. This is clearly more than the $15 per hour the progressives want, more than the average hourly earnings of around $11.50 over the last year (see chart below) and more than twice the federal minimum wage of $7.25.

These 21 state governors say their business-owner constituents are clamoring to get rid of the extra $300/wk. in expanded employment benefits. Of course, doing so still would not bring the unemployment benefit down to the roughly $11.50 average hourly earnings rate, but business owners believe it would make it at least somewhat easier to attract workers from the sidelines.

While rejecting the extra $300/wk. unemployment benefit is clearly controversial, there can be no question this expanded benefit is causing many Americans to stay home. And why not?

The other argument progressives always bring up is to simply increase hourly wages significantly. The libs seem to believe most small and medium-size business owners are awash in cash. Really? Given the terrible year we’ve just been through, why do liberals assume this?

Have progressives forgotten that an estimated 800,000 small and medium sized businesses closed in the last year, with 200,000 of those the result of the COVID pandemic, according to a recent report from the Fed? Barber shops, nail salons and other providers of personal services were the hardest hit, according to the Fed study.

The new estimates from the Fed are preliminary. In addition, some businesses that have hung on could eventually collapse under the weight of back rent, unpaid loans and other expenses.

Also, the Fed estimates don’t include the roughly 26 million US businesses without employees other than the owner. Business failures traditionally have been highest among the smallest firms, those with fewer than five employees.

In reality, the 200,000 small and medium sized business closures attributable to COVID-19 in the last year were actually somewhat lower than some previous estimates. Some economists point to extensive government aid, including the “Paycheck Protection Program,” which provided $525 billion in forgivable loans to small businesses last year, and reopened in January with an additional $284 billion in funding.

Finally, the good news is CDC researchers predicted earlier this month that COVID-19’s toll on the US will fall sharply by the end of July. This scenario assumes that unvaccinated people will follow basic precautions such as wearing masks and keeping their distance from others.

Under the most optimistic scenarios considered, by the end of July new weekly national COVID-19 cases could drop below 50,000, hospitalizations to fewer than 1,000, and deaths to only 200 to 300.

“We are not out of the woods yet, but we could be very close,” CDC Director Dr. Rochelle Walensky recently said, while noting that variants of the coronavirus are still a “wild card” which could set back progress.

It remains to be seen if more states than the current 21 will opt to end the $300/wk. federal unemployment benefit just ahead. In any event, the benefit is set to end on September 6, unless the Biden administration decides to extend it – which will not surprise me.

 

One Response to 21 States Cancel $300/Week Unemployment Benefits

  1. all your points are valid. However, please consider that BECAUSE so many small businesses have closed, some increase in wages coupled with the end of supplemental federal money could produce carrot and stick incentives.