Sarah Gonzalez: I'm Sarah Gonzalez in for Tanzina Vega. You're listening to The Takeaway. More and more republican led states are planning to opt out of the enhanced federal unemployment programs before they're set to expire in September. These benefits include an extra $300 a week for those collecting unemployment and extended eligibility for self-employed and gig workers.
The program has been in effect since March 2020 after former President Donald Trump signed the CARES Act. They were extended under President Joe Biden's American Rescue Plan. Some Republican governors say they don't want the extra $300 for residents anymore. Why not? For that and more we're talking to Greg Iacurci, personal finance reporter at CNBC. Greg, welcome back to the show.
Greg Iacurci: Hi, thank you for having me.
Sarah Gonzalez: Greg, more than a dozen states have announced their intentions to opt out of the enhanced federal unemployment benefits. Do you have a sense of how many people will be affected by this?
Greg Iacurci: Yes, actually, as of Thursday, it had reached at least 16 states, and that's going to affect nearly two million individuals.
Sarah Gonzalez: Tell us about the states that are opting out. Is this falling along partisan lines?
Greg Iacurci: Yes. To date, all of the states that have opted out are led by Republican governors. It seems to be breaking along partisan lines at this point.
Sarah Gonzalez: To be clear, the money for this has been set aside from the federal government, states are just turning it down. What is the argument from these states?
Greg Iacurci: This is federal money that the states are turning down. They're exiting these programs about two to two and a half months ahead of time. These benefits were supposed to last or they're available to workers through Labor Day, September 6th. These governors are claiming that labor shortages are the reason for their decisions. They're saying that these enhanced unemployment benefits are offering an incentive for people to stay home, essentially stay on the sidelines, they're getting paid a decent amount of money to stay home instead of go out and find a job.
Sarah Gonzalez: The argument on the right is that unemployment benefits are just too good right now. It's going to make people not want to come back to work. They say this is why we're seeing labor shortages right now even though there doesn't seem to be any substantial evidence showing that unemployment benefits are causing these labor shortages. What is really driving the labor shortage, Greg?
Greg Iacurci: It's a complicated picture which makes this confusing. Economists point to a number of things. Unemployment benefits may be playing a small role here. Research shows that higher unemployment benefits do tend to generally have a bit of a disincentive effects and lead to fewer job applications when people are getting higher benefits. That could be playing a role. The economists I've spoken with don't think it's the primary factor, though. Largely, they think it's being driven by Coronavirus still and the effects of the virus.
You have health concerns still, infection rates are still in the tens of thousands of new cases a day. Vaccinations among working-age adults are still relatively low. You have those health concerns, people might still feel uneasy about going back to work under those circumstances. The Coronavirus also lead to other labor effects too that are unique in this current crisis. You have childcare needs, kids may need to stay home from school. Still, they may be hybrid learning or remote learning and parents need to stay home to watch over them.
The COVID also caused some early retirements among baby boomers, maybe because they were laid off or they were just afraid to get sick at the workplace. It's not clear that those baby boomers are going to readily come back into the workforce. There are a number of things that could be leading to these labor shortages.
Sarah Gonzalez: Greg, do you know how residents in these states feel about this?
Greg Iacurci: Well, I think you have two different points of view, you have the business community, which has largely cheered these decisions. Then you have the workers themselves who feel they're being left out in the cold here. They may have been budgeting for two to two and a half additional months of benefits and now they're being cut off. Of course, the business community feels that these enhanced benefits have been keeping people on the sidelines to a certain extent.
Sarah Gonzalez: Are there specific workers in these states that this will affect more than others?
Greg Iacurci: It does appear that the minority workers will be more affected than others. That's largely because those groups of workers have been disproportionately impacted by layoffs across the country. In states that are pulling out early from these benefit programs in upwards of 50, 60%, sometimes of unemployment recipients in these states are Black workers. It does look like there's going to be a disproportionate impact.
Sarah Gonzalez: Many of the states opting out are among the least wealthy in the United States. When would all of this take effect? Do residents lose benefits immediately or months from now?
Greg Iacurci: At the earliest, June 12th. It varies by state. The earliest states are going to be June 12th. Then as late as July 10th. It seems anywhere from mid-June to early to mid-July.
Sarah Gonzalez: I imagine states are still keeping their own unemployment benefits in place even though they're opting out of the federal benefits.
Greg Iacurci: Yes, that is true, residents will still be getting their weekly state benefits, they will not be getting that extra $300. Usually, state benefits replace around 50% of pre-layoff wages. People would definitely be taking a pay cut there. Also, something important to note is that self-employed and gig workers and long-term unemployed individuals who've been collecting benefits for generally more than six months will be cut off from benefits entirely in most circumstances.
Again, it varies by state. There are some states like Arizona where that's not the case. All of their benefits right now are being paid with federal money. They'd be losing that entirely.
Sarah Gonzalez: State unemployment benefits don't replace your full salary. Usually, it's a percentage of what you used to make. Are there any concerns about states running out of money to pay their residents unemployment benefits?
Greg Iacurci: No, I don't believe so. States can borrow from the federal government to pay benefits if their trust funds run dry. I don't think that in and of itself is a concern.
Sarah Gonzalez: Do workers in these states have any options to fight this? Can the US Labor Department maybe prevent the loss of these benefits?
Greg Iacurci: I'm not aware of any recourse that the workers themselves have in this situation. The Labor Department may be able to do something. Senator Bernie Sanders and a group called the National Employment Law Project have each sent letters to Labor Secretary Marty Walsh. They claim that the Labor Secretary has the legal authority and indeed, needs to step in. The language in the CARES Act suggests that he has an obligation to step in to prevent states from cutting off this aid to people under a certain program called Pandemic Unemployment Assistance.
This is the program that pays benefits to self-employed and gig workers and others who are typically ineligible for state benefits. That's the only program where this seems to apply where he may have the legal authority to do something. It's unclear whether there will be any intervention on behalf of workers. The Labor Department is still reviewing those letters to see if they can do anything.
Sarah Gonzalez: Greg Iacurci is a personal finance reporter at CNBC. Thanks, Greg.
New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.