By Andy Kriege, YSN
Like most small businesses across the nation, Montana and South Carolina are facing a labor shortage crisis.
In response, the governors of both states plan to end federally subsidized $300-a-week expanded unemployment benefits, and Gov. Greg Gianforte of Montana also favors a one-time $1,200 bonus for residents who re-enter the workforce.
[UPDATE: As of May 14, at least 16 states are opting out of federal unemployment benefits.]
Citing Montana’s “severe workforce shortage,” Gianforte declared his state the first in the nation to end enhanced COVID-19 pandemic unemployment benefits. “Montana is open for business again, but I hear from too many employers throughout our state who can’t find workers,” he said in a statement. “Nearly every sector in our economy faces a labor shortage. Incentives matter, and the vast expansion of federal unemployment benefits is now doing more harm than good. We need to incentivize Montanans to reenter the workforce.”
To that end, the state — whose labor force has contracted by 10,000 workers since the onset of the pandemic and whose 3.8 percent unemployment rate is near pre-COVID lows — will return its unemployment insurance system to its pre-pandemic rules and benefit levels on June 27.
South Carolina followed Montana’s lead by announcing that it too would be opting out of the additional federal benefits at the end of June. Gov. Henry McMaster believes the shortage was created in large part due to the supplemental federal payments.
“In many instances, these payments are greater than the worker’s previous paychecks,” McMaster said in a statement. “What was intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic has turned into a dangerous federal entitlement, incentivizing and paying workers to stay at home rather than encouraging them to return to the workplace.”
Joe Biden’s $1.9 trillion American Rescue Plan, which the president signed in mid-March, extends unemployment benefits and a $300 weekly pandemic supplement through Sept. 6. It is unclear if there will be an effort to push the additional federal benefits beyond that.
The U.S. Chamber of Commerce views the extended benefits as a hindrance to both the workers and employers. In a statement, Neil Bradley, the association’s vice president, said last week’s disappointing jobs report “makes it clear that paying people not to work is dampening what should be a stronger jobs market. We need a comprehensive approach to dealing with our workforce issues and the very threat unfilled positions poses to our economic recovery from the pandemic.”
Feeling the labor pinch, many BrandSource dealers agree. As Jeff Zeglin of Zeglin’s Appliancein Davenport, Iowa, noted, “When the government is paying people $15 an hour to stay home, it’s hard to motivate them to come to work. People aren’t motivated to work when they are paid to stay home.”
“It’s been a really big issue for us,” Zeglin continued. “I would hire four more delivery people and two more service techs today if I could just get them to come in, apply, and then show up for work. I’m working my current employees to death because I can’t get enough help.”
Observed Brad Cole, principal of Cole’s Appliance and Region Manager of BrandSource’s Michigan Region, “Many of our region members had employees stay home at the beginning of the pandemic for safety concerns. But as time went on, measures were put into place to protect everyone’s work environment, yet some employees decided not to come back as they were making more money from unemployment benefits to stay at home.”
“It truly is a problem,” Cole added. “Many of them still are not back to work when the job is still there waiting for them.”
Ron Bemis of Bemis Appliance in Yakima, Wash., agreed. “The government is making it too easy not to work. We are short of help across the board, but in particular in the low-skill jobs. I really need delivery people. The ads we have been placing get no response. What makes things worse is when people that take the job, they often only show up for a week.”
Jackie King of Nampa Appliance TV & Mattress in Nampa, Idaho, is similarly hard pressed. “Our region has been struggling to find enough workers for quite some time, and of course the extension of unemployment benefits has had a huge impact,” she noted. “Sources we usually rely on to send us applicants have dried up. I need to put two more trucks on the road now. If I can’t find more help, I will have to turn business away.”
King said she was compelled to increase wages and benefits simply to keep the qualified employees she already has. “Almost every business along our busiest thoroughfare has ‘help wanted’ signs up,” she added.
Last week’s disappointing job numbers indeed show a shrinking labor pool with many workers still on the sidelines. Hiring was way down in April, with nonfarm payrolls increasing by a far less-than-expected 266,000 jobs, compared to Dow Jones’ estimate of 1 million new hires. At the same time, the unemployment rate rose to 6.1 percent amid an escalating shortage of available workers, compared to Dow Jones’ projected unemployment rate of 5.8 percent.
Whether additional states will follow the lead of Montana and South Carolina remains to be seen. That said, regardless of how much the labor market is impacted by federal policy, a continued shortage of willing workers coupled with upward wage pressure is likely to be a reality for all employers for the foreseeable future. Plan accordingly.
BrandSource, a unit of YSN publisher AVB Inc., is a nationwide buying group for independent appliance, mattress, furniture and CE dealers.