An article caught our attention last week concerning Montana’s intention to “end its participation next month in the federal unemployment program that gives extra payments to jobless workers.”
Saying “extra federal unemployment benefits are ‘doing more harm than good’,” Montana’s Governor Greg Gianforte said the state was taking measures to stop taking federal unemployment funds beginning June 27.
The rationale for taking action, Governor Gianforte said, was “I hear from too many employers throughout our state who can’t find workers. Nearly every sector in our economy faces a labor shortage.” The article went on to say the Governor’s remarks “echoed comments by some that that the extra payments have served as an incentive for people to stay home, collect the money and not seek work.”
Montana’s unemployment rate fell to 3.8% last month – a level that existed before the COVID pandemic.
Replacing the $300 per week federal money for unemployed Montana workers will be a new incentive program where “workers currently receiving unemployment payments can qualify for a one-time $1,200 bonus after they have completed four weeks in their new jobs.”
Every state’s situation is unique. The one-size-fits-all concept of sending federal money into every state comes up short in an example like Montana where unemployment rates are back to pre-COVID levels. So the extra money does appear to be a disincentive for some still on unemployment to find work at a time when businesses hoping to reopen are crying out for help to find workers and get their business up to full speed to replenish their losses from last year.
The article was a reminder of what happened in North Carolina after the Reform Majority rose to leadership in 2010 and took measures to address our state’s unemployment problem at that time. Prior leadership, according to the Employment Security Commission, had begun borrowing from the Federal Government in February 2009. Peak borrowing was in May 2012 – a deficit to the federal government of $2.8 Billion.
The Reform Majority passed of S.L. 2013-2 (HB4) in 2013 – which led to the debt being retired by April 2015. By October, 2019, funds in the Unemployment Compensation Fund had increased to a surplus of $3.74 Billion, according to the Office of the State Controller’s Comprehensive Annual Financial Report (CAFR).
The result of this action was also a job creator. The savings for employers were big. The Reform Majority’s efforts lowered the state unemployment tax from $126 to $42 per employee. That’s a 67% reduction in unemployment taxes on job creators and businesses that helped business create jobs and energize the economy.
The reserve has also helped countless families across North Carolina make ends meet in the past year of the COVID outbreak in the state.
The bold steps by the Reform Majority in the NC legislature caught the attention of the nation. The Wall Street Journal praised the action, pointing out North Carolina as “among some smart states that have begun to resist Uncle Sam’s not-so-free unemployment benefits and loans.”
The WSJ went on to say, “North Carolina, for example, was criticized as heartless for scaling back benefits earlier this year. But by doing so enabled Raleigh to avoid an (employer U1) payroll tax hike. Maybe it’s time to consider whether the big expansion of unemployment insurance has increased joblessness.”
All the Reform Majority did in 2013 was understand human nature. When they cut jobless benefits, more able-bodied folks went out and got jobs. Right now, employers are begging for more workers to help them run their businesses and open back up. Let’s hope Montana’s actions and North Carolina’s wise example of eight years ago helps other states plot a course that will continue to help get our economy back on track.