Only about 61 percent of the adults in Montana are employed at the moment. That leaves more than 300,000 who aren’t working. So I was surprised when the state’s Republican governor, Greg Gianforte, declared in May that Montana is experiencing a “labor shortage.”
In capitalist countries, the standard remedy for labor shortages is to recruit workers by offering higher wages or other inducements. Mr. Gianforte has a different plan in mind. Beginning June 27, the state will reduce weekly payments to unemployed workers by $300, cutting off a federal subsidy that was scheduled to run through early September.
This struck other Republican governors as such a good idea that 23 other states have since announced plans to follow Montana’s example. Together they intend to reject more than $26 billion in federal aid payments to 4.5 million unemployed workers — money that would have helped those workers and surely would have been spent mostly in those states.
A lot of people are going to get hurt, and the pain will not be distributed randomly.
States administer unemployment benefits because racist Southern senators in the 1930s and the 1940s prevented the creation of a federal system. Almost a century later, Southern states still operate the stingiest unemployment programs. In recent years, for example, unemployed workers in New Jersey have been roughly five times as likely to qualify for jobless benefits as those in North Carolina. The benefits in New Jersey are larger and last longer, too.
The legacy of the racism that infected so many of the New Deal’s achievements is particularly bitter for Black workers, who continue to live disproportionately in the states that provide the least aid to those who lose their jobs. During the last recession, only 23.8 percent of unemployed Black workers received benefits, compared to 33.2 percent of white workers, according to a 2012 analysis by the Urban Institute. Those who qualify for benefits also get less money. On average, the 11 former Confederate states replace just 40 percent of lost wages, compared to an average of 46 percent in the rest of the United States.
The supplemental federal payments have temporarily lifted all boats, raising the average weekly payment in the stingiest state, Mississippi, above the precrisis average payment in the most generous state, Hawaii. But in the coming weeks, as blue states continue to accept federal funds while red states stop, the gap will yawn wider than ever.
Although Americans generally agree that government should not act with racist intent, the unemployment safety net was designed with racist intent. And it continues to work in the way that it was designed, allowing Mississippi to badly serve Americans who live there.
The creation of a federal system to provide aid to jobless workers is long overdue.
Under a federal system, maintaining supplemental payments through the summer would be an easy call. The federal government has provided money to bulk up state benefit programs during every economic downturn since 1958 because benefits are calibrated for normal times, replacing about half of lost salary to strike a balance between carrying people through trouble and encouraging them to look for work. During a downturn, it makes sense to provide more help. During the Covid-19 pandemic, those supplemental payments — initially $600 a week, more recently $300 a week — have kept millions of Americans from poverty.
For opponents of the federal supplements, any evidence the payments are allowing people to stay out of the job market or are driving up wages is seen as damning.
To justify Mr. Gianforte’s decision, Montana retailed stories of a Kalispell coffee shop that closed because it couldn’t find enough workers and a Missoula bakery that is struggling to hire even after raising its base wage to $11.50 an hour from $10.50 an hour.
Some defenders of the payments have fallen into the trap of arguing that any effect on the behavior of workers is insignificant.
They may be right. While it’s common sense that a person getting more federal aid has less need to work, less is not the same as none. For people who are out of work, the federal aid is just one factor among many. Some people already are searching assiduously. Others have sufficient reasons to wait, like worries about workplace safety or child care.
There is no evidence of mass lollygagging. Indeed, the data runs in the other direction. Federal payments have not altered the gaps among states; everyone is simply getting more. And the Labor Department reports no sign of slower job growth in more generous states.
But proponents of the federal payments are still fighting the wrong fight. Unemployment benefits and Social Security, created by the same 1935 law, were intended not just to help those who couldn’t find work but to allow older Americans to retire. President Franklin Roosevelt and his lieutenants knew that a stronger safety net would drive up wages. They understood that helping those who weren’t working would help those who were working, too.
In recent decades, the federal government has allowed states to chop away at unemployment benefits, driving desperation up and wages down. Nationwide, the share of jobless workers who succeeded in obtaining unemployment benefits fell from 44 percent in 1980 to about 28 percent in 2019, according to the W.E. Upjohn Institute for Employment Research.
The average amount that workers got, relative to prior wages, has also been in steady decline.
This state of affairs ought to be intolerable even when the economy is growing. The federal government should set stronger minimum standards for unemployment benefits.
Losing a job is always a crisis for the people who lose the job. It doesn’t matter how many others lost jobs that week. And it shouldn’t matter what state they live in.