Unemployment Benefits Create Havoc for Employers and Site Selection Decisions

Employers are feeling the squeeze as the job market recovers from the COVID-19 pandemic. Most people might think finding workers would be easy when the unemployment rate is 6%; however, it is the opposite due to several factors. In fact, unemployment benefits are probably the main culprit behind the labor shortage. To help you understand how and why unemployment benefits may be hurting your recruitment efforts and impacting your site selection decisions, Site Selection Group has evaluated the situation to help you determine your corporate location strategies.

CARES Act created the problem

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted in March 2020 and triggered a lot of the labor challenges faced by companies today. It was intended to expand unemployment benefits due to the pandemic as unemployment spiked. The legislation did three primary things: offered bigger unemployment checks, increased the duration of those payments, and extended jobless benefits to previously ineligible groups of workers, like gig workers and freelancers. The legislation was later extended in December 2020 before its expiration and more recently, the American Rescue Plan further extended the benefits through September 6, 2021.

42% of the unemployed are making more money via unemployment benefits

According to the National Bureau of Economic Research, 42% of the unemployed make more money collecting unemployment than they made working before the pandemic hit. And that percentage was even larger — 76% — before the federal government cut its unemployment aid to $300 from $600.

Unemployment recipients receive $12.50 to $20 per hour

The expanded unemployment benefits have resulted in an unemployment recipient earning the equivalent of working full time for $12.50 to $20 per hour depending on the state. The impact has been far-reaching and counter-productive to getting the economy back on its feet. The greatest impact has been on employers in lower-wage occupations such as restaurants, retail, distribution centers, call centers, and manufacturing operations. These operations have been hit the hardest and continue to struggle to find employees.

Some states end enhanced benefits early

In response to the impact on labor availability, some Republican-led states recently have rejected the supplemental $300 benefits to try to help employers. At least 21 states have decided to end the benefits early. The states include Alabama, Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, and Wyoming. Most of these states plan to end the additional benefits in June or July — several months before the September expiration.

Unemployment benefits vary by state

Unemployment benefits will vary by state. This is important to understand as you try to unravel the reasons why you might be struggling to hire workers or as you make a site selection decision. For example, Massachusetts has the highest unemployment benefits with a standard $823 per week plus the $300 supplement for a total of $1,123 per week for up to 39 weeks. The following table compares all states:

Conclusions

Despite high unemployment, companies are struggling to recruit employees across the country. Lower wage occupations in operations such as restaurants, retail, distribution centers, call centers, and manufacturing plants have been hit the hardest as it is often more lucrative to take unemployment benefits than to take a job. As a result, it is difficult for companies to make site selection decisions due to misleading labor conditions. It may take months after the expiration of the supplemental benefits before the labor markets stabilize.