More Than 20 States Are Cutting Unemployment Benefits to Force People Back to Work

unemployment May 20, 2021

The U.S. April jobs report showed disappointing growth, with only 266,000 jobs added in the country (far short of the million estimated). While ongoing unemployment is part of the issue, in some areas business owners are reporting labor shortages. To combat the problem, legislators in some Republican states have announced that they will be ceasing distribution of federal unemployment boosts to force workers to take jobs. Here’s what you need to know about the news.

Which States Are Cutting Unemployment Benefits?

Since May 11th, 22 GOP-led states have announced that they will stop providing the federal unemployment boost, including Montana, South Carolina, Arkansas, Mississippi, North Dakota, and Iowa. They will stop providing the $300 federal unemployment boost and other federal unemployment COVID relief programs like the PUA (unemployment benefits for the self-employed) next month.

In total, 3.6 million people are expected to lose benefits entirely or see them sharply reduced.  The federal government did not require that states participate in the stimulus unemployment programs, so the Biden Administration has no recourse to force states to continue providing the boost.

In addition to states cutting benefits entirely, many state governments have announced plans to reinstate job search requirements. Prior to the pandemic, unemployment recipients had to prove that they were searching for a job to get benefits; that rule has been rescinded for the past year, but things are changing. 36 states have reinstated job search requirements or have said that they will soon, including Florida, Colorado, Massachusetts and Texas.

Why Are States Cutting Unemployment Benefits?

Small business owners are having difficulty filling open positions in some areas, and legislators in these states believe that the reason is higher unemployment payments. They argue that people are earning as much or even more than they would earn in the workplace on unemployment, and therefore have no incentive to return to work.

"What was intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic has turned into a dangerous federal entitlement, incentivizing and paying workers to stay at home rather than encouraging them to return to the workplace,” said South Carolina Gov. Henry McMaster.

Will Cutting Unemployment Increase Incentive to Return to Work?

While filling jobs and reopening businesses will be key to the U.S. economy’s recovery, experts aren’t convinced that cutting unemployment will actually incentivize workers; it may just leave vulnerable people unable to pay their bills. The reason? People receiving unemployment may be unable to return to work, not unwilling.

Children have not yet returned to school in all areas, childcare centers may be closed, and while virus cases have dropped, they are still high (close to 40,000 cases a day). In addition, some “COVID Long-Haulers” may be unable to return to work if they were in physical jobs before getting the virus.

"It is fanciful to believe we can flip a switch and return to [the] world we left given the detour we have taken,” she said. “Some changes triggered by the pandemic will be long lasting,” said Diane Swonk, chief economist at Grant Thornton.

More Unemployment Information

We will keep you updated as more news is released about unemployment boosts and benefits. In the meantime, you can read some of our other unemployment coverage below.

📌Will You Pay Taxes On Unemployment?

📌 What's the Difference Between Partial and Full Unemployment?

📌 Was Your Unemployment Application Denied? Here's What to Do

📌 Pro-tip: Join nearly 100,000 others getting early access to grants and other funding opportunities. Don't miss out on new grants and low-interest capital for your small business!

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