So Long, Farewell to the Unemployment Bonus

Nick Stehle | October 12, 2021 | 3:02pm EDT
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A man proffers dollar bills. (Photo credit: Getty/Yuri Cortez/AFP)
A man proffers dollar bills. (Photo credit: Getty/Yuri Cortez/AFP)

Sept. 6 was an important day for our country—the day we said goodbye to the job-killing federal unemployment bonus. 

The bonus, which originally appeared last year as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), was intended to be temporary assistance during the worst of the pandemic for people who lost their jobs through no fault of their own. 

As states began to loosen their restrictions and businesses started hiring again, workers continued to stay home because the $300 weekly bonus made unemployment more lucrative than work. Coupled with a ban on evictions, monthly Child Tax Credit checks, and other expanded benefits, there was little incentive to return to the workforce and 10.4 million jobs went unfilled.

The destruction was widespread—and predictable. More than 70 percent of small businesses struggled to find the help they desperately needed. After enduring month after month of lockdowns, the mom-and-pop shops lucky enough to survive were put in the impossible position of having to compete with the federal government for labor. 

While business owners grappled with government policies, they faced criticism from supporters of the bonus, who claimed that hourly wages were to blame for worker shortages. Even while many offered record-high pay and hiring bonuses to get people back, business owners just couldn't compete with the government luxury of extended time off with pay. As time wore on, American Dreams across the nation were laid to rest.

Powerful testimony from business owners across the country put a face on how devastating the unemployment bonuses were to communities. Kiki Cyrus of Kiki’s Chicken and Waffles in South Carolina and Patrick Pelley of Books and Brews in West Virginia were among those who suffered from government shutdowns and then inflated unemployment benefits. Their establishments survived, but many others closed for good. Businesses that had been in families for generations pulled the chain on their blinking neon open signs for the last time as government dependency, not work, became the norm in their communities. 

The consequences of this inequitable burden extended further than just payroll. Thanks to the bonuses and shutdowns, states’ unemployment trust funds plummeted by more than 96 percent between January 2020 and September 2020. In many states, particularly California, the trust funds are now wholly insolvent due to a combination of extended unemployment benefits, a drop in income tax collections, and widespread fraud. As states set their sights on repairing their broken unemployment programs, funding for other resources that help the truly needy were at risk. 

These unnecessary changes to their unemployment system blinded them from a better solution: ending inflated unemployment benefits. We know that the end of the bonus will boost the economy. In 2020, when the first $600 bonus from the CARES Act expired, the number of people on regular state unemployment dropped by nearly two million in just the first two weeks. Hundreds of thousands of jobs were filled, and nearly 1.5 million new businesses were created. And our economy kicked into overdrive. 

Montana was the first state to opt out of the $300 version of the bonus, which spurred 25 other states to follow suit. The results were incredible for Big Sky Country. Since May, there have been 70,000 hires and the state’s growth in income tax reached double digits for the first time in as long as a decade. And unemployment spending dropped from $8.3 million to only $973,000, improving the sustainability of the program and protecting resources for those who truly need them. 

With the $300 bonus gone, other states will likely see similar results. That is, if it’s not replaced with something else. States could extend their own unemployment bonuses, but they’d be choosing a path of great resistance if they truly want their economies to recover and communities to thrive.

Over the course of 18 months, thousands of businesses were destroyed and lives forever altered, but our country has a path forward. Now that the Sept. 6 expiration has passed, states must choose to empower the American workforce rather than expand welfare further. They must bid adieu to policies that are holding Americans and our economy back. 

Nick Stehle is the vice president of communications at the Foundation for Government Accountability.

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