Will unemployment benefits drive even more businesses to close their doors?


There are more than 8 million jobs available to workers across the United States.

Normally, we’d celebrate this news: It’s a sign of growth. Unfortunately, right now, it’s a crisis. The number of openings is a direct result of overly generous unemployment benefits — including allowing people to refuse work offers and stay on state unemployment programs.

It all began last March as Congress passed the CARES Act to help workers navigate unprecedented times by giving unemployment recipients a $600 weekly bonus, a cash benefit that was made in addition to what the state already provided. This move turned a temporary, limited program that was meant to help people who lost their jobs, through no fault of their own, into a lucrative benefit. This initial bonus expired last summer, but it was extended, and then extended again at a lower rate. Worse, eligibility rules for other programs were relaxed, key work search requirements were suspended, and fraud ran rampant.

Today, people can receive nearly $3,700 each month in unemployment and other cash benefits without ever having to step foot into a job, and in many states, they can do so without even looking for one. Unemployment benefits pay nearly double the median income in many towns and cities across the country and roughly $10,000 more than the United States’s median income.

What has this led to? Small businesses fortunate enough to survive lockdowns are now greeted by a massive labor shortage. In fact, 73% of small-business owners report having difficulty hiring workers. Most have been forced to turn away customers or missed other growth opportunities simply because they couldn’t find enough employees. What’s most striking? One in three say they’re likely to close within the next year if they cannot find enough workers.

This sad reality shouldn’t be a surprise. It’s no wonder America’s workers are refusing to work: The government has made it more lucrative to sit at home than to work.

There are lots of excuses being made for this, one of the most common being that “jobs don’t pay enough.” Supporters of the extended unemployment bonuses say that if there is a labor shortage, it’s because businesses aren’t compensating their employees well enough — and weren’t pre-pandemic, either.

That’s quite the accusation to make of businesses when they’re barely making ends meet after months, even a year, of lockdowns and mandated restrictions. People can’t expect businesses in small-town America to compete with the federal government when it comes to payouts and benefits — many are barely hanging on financially. Blaming the labor shortage on small businesses is, in a sense, victim blaming.

The best path to better jobs and better pay is a robust workforce and a growing economy. And conversations about how to encourage improved pay, better benefits, and child care are all important. Of course, lower unemployment taxes caused by less abuse of the system would free up business revenue to offer higher wages. But we don’t reach a consensus or move the needle on these issues by running our businesses into the ground. We’ve already lost more than 200,000 small businesses — how many more need to go out of business before Congress and the Biden administration ease up?

There is still time to right this ship before a new jobs report paints another bleak picture. With more than 20 states resisting additional bonuses, momentum is on the federal government’s side to put a stop to this artificially high unemployment.

It’s past time to end the unemployment bonus and get millions of workers off the sidelines and back to work. The future of our recovery, and the future of millions of small businesses, depend on it.

Victoria Eardley is the marketing director at the Foundation for Government Accountability.

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