When Congress established the Federal Unemployment Tax Act (FUTA) in 1935, it was intended to provide temporary and partial income replacement for workers who lost their jobs through no fault of their own. It was supposed to be a “bridge” to a new job and not “in lieu of compensation” to remain jobless.
The coronavirus pandemic produced massive layoffs. The resulting economic downturn swelled the ranks of unemployed Americans by more than 14 million — from 6.2 million in February to 20.5 million in May 2020, Pew Research reported. The unemployment rate jumped from 3.8 to 13 percent.
However, in the last few months with more Americans being vaccinated, our economy is catching fire only to find employers in frantic searches for people to fill job vacancies.
Now, the emphasis is shifting to safely reopening schools, restaurants, factories and shops by stepping up “shots in the arms” vaccination programs.
The number of unfilled jobs soared to nearly 15 million by mid-March 2021, according to ZipRecruiter. The online job site reported “discouraged, hesitant and fearful job seekers” accounted for many positions remaining vacant.
Recently, the Labor Department’s jobs numbers were disappointing. The total nonfarm payroll employment rose by 266,000 in April 2021, far below the 1 million expected by Dow Jones economists.
When the pandemic struck a year ago, our economy tanked. President Trump and Congress needed to act swiftly and did.
In March 2020, Congress passed a $2 trillion stimulus bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act to blunt the impact of the COVID pandemic economic downturn.
CARES extended regular unemployment benefits from 26 weeks, to as long as 39 weeks and temporarily suspended work search requirements. In addition, it funded a new Federal Pandemic Unemployment Compensation (FPUC) benefit of $600 per week on top of the regular unemployment benefits.
That continued through the end of July 2020; however, the FPUC was modified and extended to provide an additional $300 per week in benefits until March 31, 2021.
President Joe Biden’s $1.9 trillion COVID-19 relief package extends enhanced unemployment benefits until Labor Day, Sept. 6, with a $300 federal bonus on top of what states pay.
The U.S. Chamber of Commerce believes the additional $300 per week is enticing Americans to stay at home. “The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” the Chamber added.
With millions of employers looking for workers, Republicans say emphasis needs to shift to encourage people to seek work. Employers nationwide say the enhanced federal unemployment benefits will only add to workers’ reticence to fill the millions of open positions — a conclusion President Biden denies.
However, some states, such as Montana, are rejecting the added $300 payment. Gov. Greg Gianforte, a Republican, told the Associated Press that extra federal unemployment benefits are doing more harm than good, echoing the Chamber’s comments — “extra payments have served as an incentive for people to stay home, collect the money and not seek work.”
Instead, Montana instituted an 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.
Montana is among several states announcing it will reinstate the work-search requirement. Others include Vermont, New Hampshire and Arizona.
Finally, lawmakers must find ways to generate tax revenue without further damaging our economy. In 2020, the federal government took in $3.42 trillion, but spent $6.5 trillion. Putting people safely back to work and paying taxes on what they earn is a necessary step forward.
Don C. Brunell is a business analyst, writer and columnist.