Economists have noted several factors that could be discouraging people from returning to work

By Morgan Smith
June 07, 2021 03:35 PM
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Looking for a job? Your state might pay you to get back to work. 

Governors in six states are offering cash incentives to encourage residents to re-enter the workforce amid a growing labor shortage spurred by the COVID-19 pandemic. 

In May, Montana became the first to announce it would be replacing federal unemployment benefits with a "return-to-work bonus" amounting to $1,200 for unemployed people who complete four full weeks of paid work. 

New Hampshire and Oklahoma followed with their own plans only weeks later: New Hampshire, through its Summer Stipend Program, will pay $500 and $1,000 bonuses to residents who start part- and full-time jobs, while Oklahoma is giving $1,200 to those who accept full-time work. 

Arizona, Connecticut and Colorado are also offering sizable payments to residents who find jobs. Arizona's Back to Work program will give one-time $1,000 payments to unemployment recipients who start part-time jobs and $2,000 payments to those who obtain full-time employment. 

"In Arizona, we're going to use federal money to encourage people to work…instead of paying people not to work," Gov. Ducey said in a news release.

Connecticut and Colorado's incentives, however, are contingent upon individuals completing at least eight weeks of work at their new job: the first 10,000 people who return to work in Connecticut will receive a one-time payment of $1,000, while in Colorado, eligible claimants who return to full-time work in June will get $1,200. Those who returned to work in May received $1,600.

There are some caveats to the benefits. Workers in New Hampshire and Arizona, for example, are only eligible for the payments if they make less than $25 per hour. In other states, the payments are offered on a first-come, first-serve basis — in Oklahoma, only the first 20,000 qualifying residents will receive the funds. 

At least 25 states have decided to drop the federal government's unemployment program, which provides a $300 weekly supplement to the jobless, ahead of its official Sept. 6 end date, with many government leaders arguing the additional payments are disincentivizing unemployed individuals from applying to jobs, per CNBC

The Bureau of Labor Statistics' May jobs report shows signs of a shrinking labor force, as there are about 3.5 million fewer workers compared to February 2020. About 53,000 people left the workforce in May, reducing the labor force to about 160.9 million. 

"The rate at which adults are participating in the workforce has been flat since last summer," Michael Strain, the director of economic policy studies at the American Enterprise Institute, said in a tweet Friday. "This is a significant issue. Workers are not coming back." 

Economists have noted several factors that could be discouraging people from returning to work — many of which have been fueled by the COVID-19 pandemic — including health risks and complications associated with COVID-19, early retirements, career changes, furloughs and child-care duties, according to CNBC

"These factors interact with unemployment insurance, which can allow workers to take longer to rethink their careers, try to find jobs in new industries and negotiate for higher wages — but can also slow employment growth and prolong long-term unemployment," Harvard University economists Jason Furman and Wilson Powell III wrote in a recent article for the Peterson Institute for International Economics

Some business owners believe the enhanced federal unemployment benefits have slowed hiring. Jeff Benzel, a bakery owner in Arizona, told Good Morning America that he's still struggling to find workers. "Are you really gonna bust your butt for 40 hours a week for an extra 60 bucks? For a lot of people, the answer is no," he said. "I had doubled the size of the bakery in 2019, and we were doing better than we ever had and we're still not back where we were."

Still, some economists are skeptical that pulling out of the federal benefits early will improve the labor market. 

"I think it's a gamble for states to assume expanded unemployment insurance is the sole reason why they're having trouble hiring," AnnElizabeth Konkel, an economist at job site Indeed, told CNBC. "COVID is what started this entire mess, so you can't discount it until we get 100% back to normal."