A 'Now Hiring' sign is posted in front of an ice-cream shop in Los Angeles, California on May 28, ... [+]
As Forbes recently reported, nearly half of the states will end the $300 enhanced unemployment benefit early. At the same time, at least three states will pay people a bonus to go back to work. Confused? Here’s what you need to know.
$300 Enhanced Unemployment Benefits
The American Rescue Plan Act of 2021 authorized payment of an extra $300 in weekly unemployment benefits. The $300 payment is in addition to state unemployment benefits. Under the Act, these enhanced federal benefits continue until September 6, 2021.
Nearly half of the states, however, have announced plans to end these extra payments early. Last week Nebraska announced its plans to bring the extra payments to an end on June 19. Nebraska Gov. Pete Ricketts cited a report showing the state’s unemployment rate to be the lowest in the country.
Nebraska joins a growing list of states, now numbering at least 24, that will end the $300 payment early.
Why are States Ending the Enhanced Benefit?
In short, there is growing concern that the federal payments are keeping people from going back to work. Earlier this month the Chamber of Commerce called for an end to the extra payments. Citing the last disappointing jobs report, the Chamber said it was “clear” that the unemployment payments were keeping people from going back to work.
For context, the April jobs report found that only 266,000 jobs were added, well below the one million new jobs economist had expected. At the same time, the number of job openings have mushroomed to more than 8 million, according to the U.S. Bureau of Labor Statistics.
Many Republicans have warned about this very outcome. “We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” Senate Minority Leader Mitch McConnell (R-Ky.) said. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”
Most Americans agree. According to a Quinnipiac poll released this month, 54% of those polled approved of states ending the extra $300 payment early. In contrast, just 38% disapproved. Further, more approved of the early termination of benefits in every income group surveyed.
Other Factors Keeping People from Work
Yet not everybody agrees. Press Secretary Jen Psaki has said the White House has found no data to support the claim that the unemployment benefits have triggered the labor shortage. Instead, Psaki points to vaccination rates and childcare issues for keeping people out of the workforce.
Federal Reserve Chairman Jerome Powell has said it’s not clear whether the benefits have caused the labor shortage. Instead, he cited a number of other factors, including childcare, geographical differences, and applicants applying for jobs without the necessary skill sets.
The next jobs report, scheduled for release on June 4th, could bolster one side or the other. Fed officials and Fed data have already begun efforts to lower expectations.
At the same time, President Biden has taken steps to help Americans get back to work. Among the measures was a directive to the Labor Department to reaffirm Unemployment Insurance rules that an individual cannot continue to receive unemployment if they “turn down a suitable job due to a general, non-specific concern about COVID-19.”
Can’t the Federal Government Overrule the States?
Unlikely. The Labor Department does not believe that it can force states to take the extra $300. While there could be further developments on this front, including the potential for litigation, it appears for now that the states have final say on whether to accept the enhanced unemployment payments.
When Does the Early Cut Off Begin?
It varies from state to state. The earliest cut-off date is June 12 for a number of states. For other states the end date is later in June or July. You can find a list of states and their cut-off dates here.
Some States are Paying a Bonus to Those Returning to Work
There is some potential good news for those returning to work. Some states are paying bonuses to those who return to work. Arizona plans to pay a $2,000 bonus to those who return to full-time work by September 6th. Those who return to part-time work could earn a $1,000 bonus. Montana is offering a $1,200 bonus, while Connecticut a $1,000 bonus. You can find more details here.
What About State Unemployment Insurance?
The early termination of benefits applies to federal enhanced benefits. These are benefits paid over and above state UI benefits. A state’s decision to end early the payment of the extra $300 does not directly affect state UI payments.
