Eight states will end federally enhanced unemployment benefits Saturday, reducing the weekly amount that people claiming unemployment benefits receive by $300.
The states — Alabama, Idaho, Indiana, Nebraska, New Hampshire, North Dakota, West Virginia and Wyoming — join Alaska, Iowa, Mississippi and Missouri, which have already eliminated the enhancement. The additional aid was part of the American Rescue Plan passed by Congress in March to help people with the economic damage caused by the coronavirus pandemic.
Overall, 25 states have indicated they will curtail the benefit before it is set to expire on September 6. All of the states are led by Republican governors who have argued it is contributing to a labor shortage that is making it difficult for companies to hire workers to fill some 9 million open positions. The curtailment of the benefit will affect roughly 4 million people, HuffPost reported.
“My decision is based on a fundamental conservative principle — we do not want people on unemployment,” Idaho Gov. Brad Little said in May when he announced the change. “We want people working. A strong economy cannot exist without workers returning to a job.”
Idaho has one of the lowest unemployment rates in the country, at 3.1%.
Economists differ on how much the added unemployment benefit has factored into the labor shortage being seen across many industries. Fear of COVID-19, difficulty finding child care and low wages are all reasons cited for the fact that so many people are staying out of the labor force. There is also the fact that about 28.6 million baby boomers chose to retire last year, 3.2 million more than in 2019.
The strong performance of the stock market, along with record levels of homeowner equity, has helped personal income grow significantly over the past year, which may also be a factor.
“The ‘reason’ given for the ending of the enhanced unemployment payments is that it is causing workers to stay on the unemployment rolls rather than accept work at lower pay,” says Joel Naroff, president at Naroff Economics. “To the extent that is true, and the level is hotly debated, then workers who actually couldn’t get jobs will be getting lower benefits while those workers who take jobs will also see their income fall as they are being forced to take lower-paying jobs. The result is that income growth will slow and may turn negative for a while. That will translate into lower retail sales, but mostly on the part of lower-income households — who will bear the burden of the benefit cutbacks.”
Naroff adds that he does not know the scope of the reductions, “but it is likely that a very high percentage of the reduced benefits and lower wages of low-income households will turn into lowered spending. When we get the income numbers, we can see the government transfer reductions and that will provide a measure of the loss of income and spending.”
Meanwhile, on Tuesday a law firm and a legal services organization in Indiana jointly filed suit to stop Gov. Eric Holcomb from ending the extended benefits on Saturday.
“These benefits have provided life-sustaining and crucial assistance to many Hoosiers during the pandemic,” Jon Laramore, executive director of Indiana Legal Services, said in a statement, according to The Associated Press. “The legislature passed a law creating a right to these benefits, and we’re asking Governor Holcomb to follow the law.”
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8 States Will End Enhanced Unemployment Benefits on Saturday originally appeared on usnews.com