Montana plans to stop some of its federally-funded unemployment benefits to address “the state’s severe workforce shortage,” according to its labor department, which will leave many out-of-work residents without any support at all.
“Nearly every sector in our economy faces a labor shortage,” Governor Greg Gianforte said in a statement on Tuesday. “The vast expansion of federal unemployment benefits is now doing more harm than good.”
Instead, the state will begin to offer return-to-work bonuses to help employers looking to hire.
Starting June 27, Montanans will lose access to the extra $300 in weekly unemployment benefits, but maintain their regular benefits. Contractors, gig workers, and others will also lose access to the Pandemic Unemployment Assistance (PUA) program, meaning those workers won’t get any benefits.
Those relying on the Pandemic Emergency Unemployment Compensation (PEUC) program, which gives additional weeks of unemployment benefits to workers, will stop receiving benefits. The state also plans to reinstate the requirement that stipulates workers must be actively searching for a job to qualify for unemployment benefits.
Read more: Top 10 tax mistakes — and how to avoid them
“Montana’s move to end these fully federally-funded UI programs, along with their COVID-19 exceptions, is cruel, ill-informed, and disproportionately harms Black and Indigenous People of Color and women,” Alexa Tapia, unemployment insurance campaign coordinator at the National Employment Law Project, told Yahoo Money. “Ending these programs would leave 22,459 people unable to support their families and hurt thousands more.”
Montana's unemployment rate was 3.8% in March, down from its 11.9% pandemic peak in April 2020, according to data by the Labor Department.
The federally-funded unemployment programs run through September 6 nationwide. Montana’s cancellation would cost workers at least $3,000 per worker in supplement benefits if they couldn’t find work through the program expiration. Workers on PUA and PEUC would lose at least $4,500 in benefits because they no longer will be eligible for the base unemployment benefit.
‘Limited evidence of work disincentives'
Different papers have established that the extra $600 in benefits distributed earlier in the pandemic had limited labor supply effects and likely didn’t disincentivize work, including one by the National Bureau of Economic Research and another by Yale University. The current supplemental benefit is worth half of what those papers reviewed.
“The 100% federally-paid unemployment benefits have boosted spending and contributed to the strong economic recovery,” Andrew Stettner, an unemployment insurance expert and senior fellow at the Century Foundation, told Yahoo Money. “It's shortsighted for the state to sacrifice that economic stimulus based on the anecdotal labor shortages concerns of a few employers, especially given the limited evidence of work disincentives from unemployment pay during the pandemic."
Montana is the first and only state to fully opt out of the federal unemployment benefit programs enacted in the pandemic and currently extended by the American Rescue Plan signed into law in March.
As a way to incentivize workers to return to work, the state is offering a one-time return-to-work payment of $1,200, using money from the American Rescue Plan to fund the program. Only those who complete four weeks of work would receive the payment.
“Incentives matter,” Gianforte said. “Our return-to-work bonus and the return to pre-pandemic unemployment programs will help get more Montanans back to work.”