Unemployment Rates

Benefit cuts are needed to get people to take jobs

Des Moines, Iowa – Iowa is set to move to a dramatic reduction in unemployment benefits in an attempt to force people to fill thousands of open jobs and reverse a trend in which the governor says the “safety net of ‘State has become a hammock’.

A measure backed only by Republicans who control the legislature would cut allowable unemployment benefits from 26 weeks to 16 weeks, putting Iowa among just six states with such severe limits. Currently, 40 states plus Washington, DC, and Puerto Rico pay up to 26 weeks of unemployment benefits, and Iowa has met that standard for nearly 40 years.

The proposed cut, which is expected to be approved soon, comes as Iowa’s unemployment rate fell to 3.5% in February and businesses in the state struggled to hire enough workers, usually to low-wage jobs.

GOP Gov. Kim Reynolds has made cuts a priority, arguing that programs such as unemployment benefits are too generous and discourage people from working. Last summer, she cut off an additional $300-a-week federal unemployment benefit three months early because she claimed she was partly to blame for a labor shortage.

“The safety net has become a hammock,” she told lawmakers earlier this year.

Other Republican-led states have taken the same approach.

Republican lawmakers in Kentucky voted last week to override their Democratic governor’s veto of a similar unemployment measure that would cut benefits from 26 weeks of eligibility to just 12 weeks. West Virginia lawmakers are considering a similar bill.

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Arkansas and Kansas also pay 16 weeks, while benefits end after 14 weeks in Alabama and 12 weeks in Florida. Georgia offers as little as 14 weeks and North Carolina as little as 12 weeks.

Iowa Republicans note that Iowa has nearly 86,000 posted jobs and too few workers to fill them.

However, Democrats have said only a third of available jobs pay enough to support a family of four and they argue benefit cuts won’t help fill job vacancies.

“You are breaking something that works for Iowans,” said Democratic Senator Janet Petersen. “This bill is heartless.

Last year, about eight states considered such measures, said Michael Leachman, spokesman for the Center on Budget and Policy Priorities, a Washington-based nonpartisan policy and research institute. In the 10 states that now offer less than the maximum of 26 weeks of benefits, the labor force participation rate is 60%, compared to 63% in the states that maintain the maximum of 26 weeks.

“State lawmakers are making a mistake. Cutting unemployed workers so quickly from the benefits they have earned will hurt those workers and their families and do little to boost labor market participation,” Leachman said. “In fact, labor force participation rates are worse on average in states that have reduced the maximum duration of benefits, as Iowa is doing in this bill.”

Instead, lawmakers should focus on raising workers’ wages, improving working conditions and ensuring parents can find affordable, quality childcare, he said.

The researchers also found that previous efforts by Iowa and other states to cut unemployment benefits did not result in faster labor force growth than in states that kept the payment.

Iowa, like many states, has lost tens of thousands of people to work due to the coronavirus pandemic. Many were retirement age employees who left their jobs permanently and women who could not find affordable child care.

These trends reflect a national labor issue, but Iowa still lags the United States in its labor force recovery. The state’s labor force — those working or looking for work — was about 2% lower in February than it was in February 2020, according to the U.S. Bureau of Labor Statistics. The US labor force has nearly recovered to around 0.4% less than two years ago.

Republican Rep. Michael Bousselot took the lead in pushing through Iowa’s benefit cut, saying he was responding to complaints that companies couldn’t find enough workers.

“It recognizes that we have more jobs available than people working or people who can occupy. He recognizes that with the supply chain crisis that we are facing, with the inflation that families are facing, getting back to work is more important than ever,” he said.

The proposal would also incentivize unemployed workers to take a lower-paying job sooner or risk losing their benefits.

Iowa businesses pay a tax of about $400 million a year that funds the Unemployment Insurance Trust Fund, and the nonpartisan Legislative Services agency estimates that Republican-backed cuts would reduce this cost by $100 million per year.

The House and Senate approved the benefit cuts, but the Senate version also requires unemployed workers to wait a week before receiving their first check. The House must now approve the addition of the Senate or the chambers must find a compromise.