More than 20 states have decided to cancel unemployment payments from COVID packages, which may be forcing recipients to take jobs they were not previously taking and driving down jobless rates as a result.
The federal pandemic assistance incentives increased the unemployment payment to $300 per person per week and extended those payments for up to 18 months when it usually does not exceed 6 or 7 months.
While the announcements indicate that in early September, the benefits will expire, state governments have the discretion to opt out of sending federal funds before that date.
As reported by Fox News, Missouri Governor Mike Parson, one of the first to voluntarily forego these relief funds, justified his decision by asserting that the benefits were helpful during the height of the pandemic, but that in the aftermath, “it has worsened the workforce problems we face.”
Parson, like many other Republican governors, made the decision to end the federally funded benefits to address business complaints about labor shortages, even though the move is already unpopular and could hurt his image with many voters.
On June 12, Missouri and four other states had already announced the suspension of payments. Then followed seven states as of June 19, and this weekend, benefits expire in 10 more states. And four others have already announced the end of benefits by July 10.
According to an analysis by the consulting firm Jefferies LLC, published by Fox News, all states that announced the suspension of the federal subsidy in subsequent weeks reflected significant reductions in unemployment rates.
Aneta Markowska, the chief financial economist at Jefferies, told Fox News that “employers had to compete with the government in the distribution of money, and that makes it very difficult to attract workers.” Especially considering that, logically, companies demand work in exchange for the distribution of money, while the state does it without demanding anything in return.
As a result, employers had to face a severe labor shortage. This type of problem is normal in countries with very low unemployment rates, but this is not the case today in the United States, which still has considerable unemployment rates despite signs of a recent economic recovery.
In fact, it is highly counterproductive for an expanding economy to artificially limit the available labor force. For this reason, many Republican governors decided to eliminate the federal payments of $300 per week to the unemployed.
The system of unemployment benefits extended by the Biden administration was highly criticized, mainly by conservative sectors and representatives of the productive sector.
Republican Governor Henry McMaster of South Carolina condemned the benefits from the outset, and in May, declared, “This is about as close to socialism that I’ve seen. We’ve got help-wanted signs up everywhere, we get calls and letters, and texts from all sorts of businesses all across the state looking for people to work. People won’t come to work because they’re getting as much money or more in some cases by staying home.”
McMaster advised the population, “Go get a job, get back to work. That’s how you build an economy and a family and everything else. The Biden proposals are totally underproductive, killing incentive, and it puts us right on the road to socialism. We’ve got to stand up and fight against this,” McMaster said.