A New Survey Just Proved Critics of ‘Super-Charged’ Unemployment Welfare Right

With COVID cases falling and states across the country reopening, the economy should be rebounding. But the latest jobs data show that the unemployment rate actually increased in April, ticking up to 6.1 percent. 

A new survey of small businesses helps shed some light on why the labor market is still stuck in a rut. The National Federation of Independent Businesses is the most prominent small business association in the US, and its new poll numbers reveal that small businesses have job openings but are desperately struggling to attract employees.

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A record-breaking 44 percent of small business owners reported having jobs they couldn’t fill in April. That’s a slight increase over the already-record-breaking March figure of 42 percent, and far above the historical average of about 22 percent on this statistic. Even as roughly 16 million Americans remain on unemployment benefits, the NFIB reports that “April is the third consecutive month with a record-high reading of unfilled job openings among small businesses.”

This is a serious, complex problem with multiple causes.

“The tight labor market is the biggest concern for small businesses who are competing with various factors such as supplemental unemployment benefits, childcare and in-person school restrictions, and the virus,” Bill Dunkelberg, the NFIB’s chief economist, said. “Many small business owners who are trying to hire are finding themselves unsuccessful and are having to delay the hiring or offer higher wages. Some owners are offering ‘show up’ bonuses for workers who agree to take the job and actually show up for work.”

However, most glaring is the fact that the ongoing federal supplementation of existing state-level unemployment benefits is making welfare pay more than work for millions of unemployed workers. A minimal familiarity with Econ 101, or even a basic understanding of incentives, reveals that such a dysfunctional welfare system will discourage employment and hobble recovery. 

Economists from across the political spectrum have acknowledged this problem.

Nonpartisan economic institutions like the Congressional Budget Office warned last year that the expansion of benefits would have this effect. Now, even former Obama administration official Larry Summers admitted the government has gone too far, acknowledging that “If we give people more money for not working than they were getting when they were working, then they’re going to stay on the sidelines.”

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Of course, free-market economists interviewed by FEE warned many months ago that the Biden administration’s plan to further expand unemployment benefits was an “economically unjustified” scheme that “incentivizes unemployment.”

How bad do job numbers have to get before President Biden and his fellow Democrats realize the system they’re perpetuating is causing serious problems? 

Thankfully, we don’t have to wait for big-government Washington politicians to have an epiphany. States like Montana are taking action on their own, declining the federal supplement and reducing benefits back to normal levels. “Incentives matter and the vast expansion of federal unemployment benefits is now doing more harm than good,” Republican Governor Greg Gianforte said.

Here’s hoping more states follow Montana’s lead, so our labor market recovery can finally wake up from this welfare state coma.