How Cuts to Unemployment Benefits Will Hurt Rural People

“We know [communities of color in rural areas] suffer from chronic high unemployment and have been really hurt by the pandemic, so I do think that this is an issue that’s gonna be hitting different communities harder,” said Andrew Stettner, a senior fellow at The Century Foundation, a left-leaning independent think tank.

“We saw in the data that African Americans are really taking advantage of these programs,” he said, ​“and they’re going to be hurt by the revocation of some of these programs. I would say economic distressed communities, writ large, are going to be losing out on a lot of these benefits.”

About 16 million people nationwide would receive a total of $100 billion in benefits if all states continued federal unemployment funds through their set expiration date of Labor Day, Sept. 6, according to an analysis of U.S. Department of Labor data by The Century Foundation. Of the states that planned to pull benefits, almost $11 billion in unemployment benefits could be lost, affecting nearly 2 million workers, the analysis found.

States have never before made this reversal — accepting the federal funds, then turning them down — Stettner said.

Montana was the first state to announce it would end the program, on May 4, cutting off the benefits June 27. Other states followed suit, including Alaska, Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Iowa, Mississippi, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia and Wyoming. All are led by Republican governors. 

Focused on Vacancies

Economists told Stateline that the decision to opt out of pandemic unemployment affects the recipients who receive the funds, which in turn reduces the flow of money into local economies. 

Some Republican governors are focusing on filling job vacancies.

“Eliminating these pandemic programs will not be a silver bullet for employers to find employees, but we currently have about 116,000 available jobs in the state,” said Indiana Gov. Eric Holcomb in a statement.

U.S. Labor Secretary Marty Walsh and President Joe Biden’s administration will ​“take concrete action to prevent anyone from falling through the cracks,” a spokesperson from the U.S. Department of Labor said in a statement. The statement doesn’t specify whether states are required to continue providing payments, as some advocacy groups have argued the department could force them to do.

Some governors and the U.S. Chamber of Commerce — which also called for an end to the $300 weekly extended benefits — opposed the extra support because, they said, benefits would disincentivize people to go back to work in industries such as food service and hospitality.

However, there is no evidence that federal pandemic unemployment benefits had a substantial effect on employment after the $600 benefits expired in July 2020, according to a February 2021 study by a researcher with the National Bureau of Economic Research.

More than half of people who received a $600 federal unemployment check returned to work before the supplement expired, found a separate February paper from the University of Chicago Becker Friedman Institute for Economics.

Many lawmakers’ views on the extended benefits fall along partisan lines.

Arkansas Gov. Asa Hutchinson said it’s time for employees to work to bring the economy up to speed.

“The $300 federal supplement helped thousands of Arkansans make it through this time, so it served its purpose. Now we need Arkansans back on the job,” Hutchinson said in a May 11 statement.

Arkansas state Sen. Ron Caldwell, a Republican, told Stateline he agreed with the governor’s decisions to end the assistance early. Caldwell pointed to available jobs in the agriculture field in his state. People who are unemployed, but afraid of getting Covid-19, he said, have to ​“balance their fear of going to work.

“It’s not very fair for working class people to get up every day and people stay at home because they afraid to get sick,” Caldwell said in a phone call. ​“Teachers, first responders are going into the field. I know [Covid-19] is very real, but we can’t stick our head in the sand and continue on with people having grocery shelves stocked and other things that have to be done.” 

Across the aisle, Arkansas state Rep. Fredrick J. Love, a Democrat, said painting the community with a broad brush hurts households.

“In rural Arkansas, some [businesses] aren’t coming back. Some are permanently closed,” Love said. ​“If people qualify for pandemic unemployment, it’s apparent they were working before. I think they’re looking for work and can’t find it or it was less [money] than they were looking for.”

In Georgia, state Rep. Kim Schofield, a Democrat, said the responsibility rests in part on some employers who don’t pay livable wages.

“We need workplace salaries to match the 21^st century workplace,” Schofield said. ​“There are larger companies who have made billions on the backs of workers. They can now give incentives back to workers, on-site child care, or raise some of the wages up to $15 and start there.” 

Although it’s challenging for smaller businesses to find employees, there isn’t a broad labor shortage, and people would go to work if jobs were available, said Wayne Vroman, an economist with The Urban Institute, an economic and social policy D.C.-based think tank.

Vroman added that the unemployment cutoffs put rural people of color at a larger disadvantage because they face higher unemployment rates. Although rural people don’t participate in unemployment programs as much, there are many who do, and if cut off from the benefits, would suffer, Vroman said.

David Cooper, a senior economic analyst at the Economic Policy Institute, a nonprofit think tank in Washington, D.C., said the true indicator of a labor shortage is rising wages, but there’s not accelerating wage growth across the board.

There is evidence, however, of a shortage in leisure and hospitality fields, he added.

“Wages in leisure and hospitality employment make up just 4% of all wages in the U.S. economy, so this is a very small portion of the economy where employers may be struggling to find folks,” Cooper said. ​“There’s no reason why difficulty for those employers should mean that we should turn off unemployment benefits for everyone.”

The industries experiencing shortages, such as leisure and trucking, don’t provide job security for workers, Stettner argued. Taking a ​“sledgehammer to the problem” by ending benefits won’t address deeper issues, he added.

Domino Effect

About 9.8 million working-age people don’t have jobs, even as the national unemployment rate is lower than last year. The rate stands at 6.1%, the most recent Bureau of Labor Statistics data show, and only 19 states and the District of Columbia exceeded the national rate. This is more magnified for Black and Latino people, who face higher unemployment rates than white people, at about 10% and 8%, respectively.

Meanwhile, states’ troubled unemployment systems have been making headlines for months. Long wait times, website crashes and high traffic at call centers all contributed to barriers for people trying to navigate the unemployment system, according to New America, a public policy think tank.

And widespread unemployment fraud hurt all jobless residents in state after state: Maryland officials have frozen claimants’ accounts because of potential unemployment fraud. Residents in Colorado are struggling to verify documents through a new technology system designed to halt potential fraud.

Communities of color also may have a harder time getting approved for unemployment assistance. A July 2020 survey by the Bipartisan Policy Center and Morning Consult found that Black and Latino workers were underrepresented in unemployment benefits. Black and Latino workers made up about 40% of the unemployed nationally, but were fewer than 20% of the recipients, the poll found.

The racial disparities in unemployment programs have always existed, said Michelle Holder, an economist and assistant professor at John Jay College of Criminal Justice. Since 1972, when the Bureau of Labor Statistics first began collecting data on unemployment among Black Americans, the rate has been more often than not twice the amount as white unemployment, according to the Center for American Progress, a left-leaning think tank based in Washington, D.C.

Holder added that Black people tend to live in states where unemployment payments are lower.

“There’s already an imbalance,” Holder said.

And rural areas benefit the most from government programs because job growth is slower. Rural residents tend to be poorer, older, and lack transportation, access to the internet and health care.

Between 2010 and 2017, the yearly job growth for rural America was 0.5% compared with 1.8% in urban areas, data from the U.S. Department of Agriculture shows.

The families hardest hit in rural areas face other hurdles, from food and housing insecurity to difficulties paying for utilities, health and child care, said Neil Sealy, executive director the Arkansas Community Organizations, a grassroots group that focuses on social and economic justice.

“This is a domino effect that affects people,” Sealy said. ​“Not having the money to survive will kick off a whole bunch of other things.”

This is why some grassroots organizers, economists and lawmakers insist that governors continue the assistance as well as administer unemployment programs more equitably.

“If we’re counting on the system to help the economy and help to reduce poverty,” said Stettner of The Century Foundation, ​“we cannot leave it to the states.”