President Biden’s push to extend supercharged unemployment benefits based on the jobless rate or other economic indicators is frustrating small business owners who are struggling to lure employees back to the workforce.
In Mr. Biden $1.8 trillion “American Families Plan,” the White House says the president wants to work with Congress “to automatically adjust the length and amount of [unemployment] benefits unemployed workers receive depending on economic conditions.”
Congressional Democrats have long pushed for so-called “automatic stabilizers” for the jobless benefits and Mr. Biden and his administration have expressed support for the idea in the past. Small business owners, though, say that indefinite federal assistance would further incentivize people to stay out of the labor market.
Congress extended a $300-per-week federal boost to regular state unemployment benefits until early September and included one-time direct payments of up to $1,400 for millions of Americans in Mr. Biden’s $1.9 trillion coronavirus relief package.
“Extending it is just going to perpetuate the problem,” said John Motta, chairman of the Coalition of Franchisee Associations. “I have people that you hire them today, they’ll work a day or two and then they don’t show up again – no call, no nothing.”
Some restaurant owners and other service industry employers are having a hard time finding workers. Some have experimented with automation but, they say, robots can’t replace all manual labor.
“There are businesses like mine that you can’t automate,” Mr. Motta said. “You need people to serve customers, to make coffee, make sandwiches — that’s really hard to automate.”
Nicole Wolter, president and CEO of HM Manufacturing in Illinois, said a friend in North Carolina offered to pay double overtime as an incentive to employees — something they have never had to do in 14 years of owning a business.
“I think when you do have these types of government programs, it’s just easier to just be at home and collect the checks versus actually having to work,” Ms. Woltor said. “Even if you do automate, you still need to have people there that have to oversee the robots, that can program the robots. It’s not a forever solution — it’s not even a quick solution.”
Mr. Motta and Ms. Wolter spoke as part of an event hosted by the Job Creators Network, a pro-free market small business advocacy group.
The overall U.S. unemployment rate for March was 6% as the economy added more than 900,000 jobs — a sea change from the throes of the pandemic when unemployment was above 14%.
The rates varied widely by state: Hawaii had the highest rate, at 9%, and four states were tied for the lowest at 2.9%: Nebraska, South Dakota, Utah and Vermont.
The business community, though, said the budding economic recovery is at risk of stalling out if employers can’t fill positions.
“We must begin to phase out the unprecedented financial assistance that was necessary to support displaced workers at the height of the pandemic,” said Suzanne Clark, president and CEO of the U.S. Chamber of Commerce. “Particularly for the hardest-hit industries, as mandates continue to be lifted and businesses can resume pre-pandemic operations and capacity, workers will be able to return to their steady paychecks so they can rebuild their lives.”
Mr. Biden also endorsed the idea of federal stabilizers when he rolled out his $1.9 trillion relief plan in January. The president’s team said then that he wanted to provide the enhanced benefits “for as long as the COVID-19 crisis continues and employment opportunities remain limited.”
Treasury Secretary Janet Yellen backed the idea during her confirmation process, saying stabilizers play a “critical role” in heading off the negative effects of an economic downturn.
“Designing and implementing a modern and effective system of automatic stabilizers is an important step to take now so that we can minimize the negative impacts of any future recessions,” Ms. Yellen said in written comments to the Senate Finance Committee.
Leading Senate Democrats, including Finance Committee Chairman Ron Wyden of Oregon and Sen. Elizabeth Warren of Massachusetts, have been pushing Mr. Biden to support recurring direct payments and automatic unemployment extensions tied to economic conditions.
“Families should not be at the mercy of constantly shifting legislative timelines and ad hoc
solutions,” they said in a recent letter to the president. “Automatic stabilizers will give families certainty that more relief is coming, allowing them to make the best decisions about how to spend their relief payments as they receive them.”
White House press secretary Jen Psaki deferred to Congress when asked about the possibility of another round of direct payments.
“We’ll see what members of Congress propose, but those are not free,” Ms. Psaki said.
Mr. Wyden, along with Senate Majority Leader Charles E. Schumer of New York and Sen. Chris Van Hollen of Maryland, had pushed legislation last year that would have extended what was then a $600-per-week boost in benefits until a state’s three-month average unemployment rate fell below 11%.
The benefits would gradually ratchet down based on economic conditions and states would need to see an extended period of unemployment below 6% before residents were fully cut off from the federal boost.
Factors such as virus fears and school closures could be partly responsible for the disconnect between high levels of unemployment in some areas and companies saying they can’t find workers, said Federal Reserve Chairman Jerome Powell.
“Clearly there’s something going on out there, as many companies are reporting labor shortages,” Mr. Powell said last week. “We don’t see wages moving up yet, and presumably we would see that in a really tight labor market.”
Studies are mixed on whether the temporary boosts in federal unemployment benefits in previous rounds of relief discouraged people from seeking work.
A February working paper from the National Bureau of Economic Research found that the end of the $600-per-week boost in federal unemployment benefits last summer didn’t necessarily have a substantial impact on employment.
“Overall, the weight of evidence seems to suggest that the unprecedentedly generous UI benefit levels during the Covid crisis did not have any substantial negative effect on jobs,” wrote Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.
Mr. Motta, though, said he’s seen firsthand the unintended consequences of perpetual federal assistance.
He said a friend of his interviewed someone on the same day the potential employee received a $1,400 stimulus check. The potential employee then canceled the interview and asked if he could come back in 30 days.
“We see that constantly happening where the federal government, in initiating these policies where they’re giving out stimulus check[s], giving out free money, additional unemployment, is keeping people from entering the entry-level jobs because they can make more money at home than they can in these entry-level jobs,” Mr. Motta said. “So the policies are hurting the small businesses in that manner.”
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