Nearly half of the governors—23 and counting—have decided to end federal supplemental unemployment benefits for workers in their states. Evidently, they never heard the old adage: “Don’t cut off your nose to spite your face.” In these bizarre times, I guess we have to be grateful that Governor Scott was raised with more common sense.
Despite the pandemic—with the business shutdowns, layoffs, school closures, illness, and all of the other things that kept so many people out of work—personal income in Vermont actually grew in 2020. It rose to $36.56 billion from $34.50 billion the previous year. That’s a 6% increase—the biggest since 2006—and all of the growth was due to unemployment benefits and to refundable tax credits.
Vermonters received $1.3 billion in state and federal unemployment payments in 2020, according to the latest data from the U.S. Bureau of Economic Analysis. It was a huge amount — more than the previous 11 years combined. But then Vermont had an unprecedented 100,000 people filing unemployment claims in a matter of months last year.
The benefits—especially the $600-a-week supplemental federal payments—drew criticism from some for being too generous. But for people who suddenly lost their income, the checks provided enough so they could cover the actual cost of feeding and housing their families and meeting normal expenses. And the fact that they could buy food, cover the rent or mortgage, make car payments, and shop for necessities helped to stabilize Vermont’s economy.
It wasn’t just unemployment recipients who benefited. The money they received also helped to support the businesses able to remain open. Unemployment recipients also paid taxes on their benefits. According to research done by the Vermont Dept. of Labor late last fall, from January through November 2020, the department remitted $37 million to the Vermont Tax Dept. in withholding taxes on benefits paid to Vermont unemployment recipients. During the same period in 2019, the Dept. of Labor withheld less than $1 million.
In states where governors are cutting off the $300-a-week supplemental federal unemployment payments, the excuse is that unemployment is discouraging work and contributing to a labor shortage. But those claims are contradicted by many studies including one from the Federal Reserve Bank of San Francisco, published when the federal benefits were twice as much.
Scott, too, sometimes falls back on the tired canard about the lazy poor. “And to be perfectly blunt, there’s some who are perfectly content staying on unemployment assistance because of the $300 stipend,” he said during an April news conference.
But he also acknowledges there are still real barriers to work and that many Vermonters continue to need support. “Child care is a big deal to some,” he said at that same press conference. “Some people just can’t get back to work. They have kids they have to take care of. And they’re not in school because of remote learning.”
In other words, Vermont’s tight labor market isn’t the fault of unemployment benefits. So employers in desperate need of workers need to find new ways to attract them—like offering higher wages. And in the long run, that will be better for everyone. Just look at what happened to Vermont’s economy last year when many more families actually had enough to live on—at least for a few months.
Jack Hoffman, senior analyst at Public Assets Institute, Montpelier