States that cut off unemployment early, like Idaho, see no hiring boom, at least not yet

·10 min read

The 20 Republican-led states that reduced unemployment benefits in June did not see an immediate spike in overall hiring, but early evidence suggests something did change: The teen hiring boom slowed in those states, and workers 25 and older returned to work more quickly.

A new analysis by payroll processor Gusto, conducted for The Washington Post, found that small restaurants and hospitality businesses in states such as Missouri, which ended the extra unemployment benefits early, saw a jump in hiring of workers over age 25. The uptick in hiring of older workers was roughly offset by the slower hiring of teens in these states. In contrast, restaurants and hospitality businesses in states such as Kansas, where the full benefits remain, have been hiring a lot more teenagers who are less experienced and less likely to qualify for unemployment aid.

In the eight states, including Idaho, that ended federal unemployment benefits on June 19, the share of the population receiving the benefits dropped by 60%, according to a study by Arindrajit Dube, an economics professor at the University of Massachusetts. Roughly 2.2% of all people 18 to 65 stopped receiving benefits. but there was no immediate boost to employment during the two to three weeks after the pandemic benefits were dropped, Dube said.

Gov. Brad Little announced the cutoff in May, giving workers five weeks’ notice.

“Employers are telling me one of the big reasons they cannot recruit and retain some workers is because those employees are receiving more on unemployment than they would while working,” Little said then. “We see ‘Help Wanted’ signs everywhere.”

Employers interviewed by the Idaho Statesman this spring expressed frustration over people who responded to job solicitations but who did not show up for interviews.

“We’ve had people who are unemployed come and sign up for an application, set up an interview and then not show up, because that checks the box to make sure they get their unemployment benefits,” said Dodds Hayden, owner of Hayden Beverage in Boise, in May.

It remains to be seen whether official data will indicate whether Idaho’s cutoff boosts the state’s employment significantly. July’s official employment estimate from the U.S. Bureau of Labor Statistics isn’t out yet.

The number of people employed in Idaho rose 0.8% from May to June, with 789,700 Idahoans employed. There were 794,800 people employed in the state in April, before dropping to 783,500 in May.

Employment was up 50,300 from June 2020 to June 2021.

The findings suggest hiring is likely to remain difficult for some time, especially in the lower-paying hospitality sector. The analysis also adds perspective to the teen hiring boom, revealing that more generous unemployment payments played a role in keeping more experienced workers on the sidelines, forcing employers to turn to younger workers. It indicates teen hiring could slow further in September, as unemployment benefits are reduced across the country and young people return to school.

There’s a growing trend in help wanted ads of lowering the age and experience requirements, especially in the hospitality sector, according to QuickHire, a recruiting firm in Wichita.ngest employee is 15, and she has many teens working as hostesses, assistant servers and table bussers. Weiss said she has been inundated with applications from teens this summer, but few from workers in their 20s or 30s.

“We’ve definitely lowered that minimum age,” said Weiss, a part owner of 715 who has worked there since it opened in 2009.

The federal government is providing unemployed workers an extra $300 a week through Sept. 6, roughly doubling how much the typical unemployed American would otherwise receive in aid. Yet, federal benefits have ignited political debates, because hiring in recent months has been weaker than expected. Republicans say the enhanced payments are playing a major role in keeping workers at home, while Democrats argue the money is a needed lifeline to help people still unable to return to work or those hoping to find a better job.

So far, early data suggests that cutting the benefits given to Americans who lost their jobs during the covid-19 pandemic has not led to a big pickup in hiring. The 20 states that reduced benefits in June had the same pace of hiring as the mostly Democrat-led states that kept the extra $300-a-week unemployment payments in place, according to state-level data from the Labor Department. Survey data from the Census Bureau and Gusto’s small-business payroll data show similar results.

Many economists and business owners say other issues such as health concerns, child-care problems and workers reassessing their career choices appear to be larger factors keeping them home.

“If what we want is a speedy economic recovery, ending unemployment insurance is not the silver bullet,” Gusto economist Luke Pardue said. But, he added, “unemployment insurance was at least partially a cause of the boom in teen employment.”

There’s a growing trend in help-wanted ads of lowering the age and experience requirements, especially in the hospitality sector, according to QuickHire, a recruiting firm in Wichita.

“Almost all of the restaurants that we work with are willing to hire kids as young as 16 now,” said Deborah Gladney, co-founder of QuickHire. “We saw a big shift in May when we started seeing a lot of restaurants drop their age requirements and offer bonuses.”

The teen unemployment rate is at its lowest level since the 1950s, according to the Bureau of Labor Statistics. The more generous unemployment benefits allowed older workers to stay home, care for children or relatives, and avoid the deadly coronavirus. Teenagers often don’t qualify for unemployment assistance, because many weren’t working pre-pandemic, and they are often still supported by parents or guardians.

At 715, Weiss and her business partners raised wages for all employees and began offering signing and referral bonuses. Even with those changes, the bulk of their applicants were teens. Weiss is hopeful that might change in September as more college students return to the University of Kansas and the unemployment benefits are reduced, but she is not banking on it.

“We are only open five days a week right now. We’re only doing dinner shifts. The main reason for that is we don’t have the staff to expand our hours,” she said. She has been telling customers that lunch and brunch probably won’t return until 2022.

The Kansas-Missouri state line provides an interesting test case for what happens when one state changes its unemployment policies. When Missouri Gov. Mike Parson announced in May the state would end federal expanded unemployment assistance programs as of June 12, the Republican said it “ensures that we will fill existing jobs, as well as the thousands of new jobs coming to our state as businesses continue to invest and expand in Missouri.”

So far, there hasn’t been a major hiring boom in Missouri. Business owners who operate in both Missouri and Kansas told The Post that Missouri’s reduction of jobless benefits had a small impact on hiring. Total employment in Missouri rose by 4,200 jobs in June with a slight increase in hospitality jobs, according to the Labor Department. Across the border in Kansas, overall employment increased by 8,100 in June and was flat in the hospitality industry.

Restaurant owners say that while unemployment benefits may be keeping some workers at home, their biggest issue is that so many workers are rethinking their lives post-pandemic and may not want to return to grueling restaurant work.

“Employees went out and found other industries. And that’s been a bigger problem than just the unemployment insurance. Getting restaurant hospitality workers back to our industry has been a challenge for almost every restaurant in the Midwest,” said Kevin Timmons, owner of sports bar Nick and Jake’s and former president of the Greater Kansas City Restaurant Association.

Some businesses that operate in both Kansas and Missouri say they have noticed more serious applicants from the Missouri side, especially in the hospitality industry.

One recruiting firm that works in both states has noted some hiring differences. Ken Meeks, chief executive of hospitality-recruiting firm ResourceOne, said he has been frustrated by the number of “ghost applicants” in Kansas, in which people apply but when his firm calls, texts and emails them to follow up, they say they still haven’t found a job but they aren’t interested in talking further. He said the situation has been a lot better in Missouri since the unemployment benefits were cut.

“We’ve seen a bump in applications over on the Missouri side in servers, bartenders and cooks coming back into the fold,” Meeks said. “No one was against unemployment when restaurants were closed. But now the jobs actually exist.”

Lately in Missouri, Meeks has also seen restaurants scaling back pay. Jobs that were paying $18 an hour now pay $15, but “employees are taking it because they’ve lost leverage on the Missouri side,” Meeks said.

The Gusto analysis also noted that among more experienced workers who returned to the workforce as benefits ended, people who had worked for a company before the pandemic were especially likely to return to their prior employer when states announced benefits would end early.

For policymakers, it’s a difficult balance figuring out when to scale back unemployment insurance for the nation’s 9.5 million unemployed. As the delta variant of the coronavirus flares up, some workers are reluctant to return to jobs in which they encounter a lot of people.

Economist Arindrajit Dube of the University of Massachusetts at Amherst found that a lot more people reported having a hard time paying their bills in states where unemployment benefits were slashed in June. He analyzed Census Bureau survey data and found a roughly 60% drop in the number of people on unemployment in the states that ended the extra $300 and the aid for self-employed and gig workers in June, but no increase in employment.

“There is evidence that the reduced UI benefits increased self-reported hardship in paying for regular expenses,” Dube wrote, adding, “Of course, this evidence is still early.”

A restaurant owner asked President Joe Biden at the recent CNN Town Hall in Ohio about what the White House is doing to help businesses hire. Biden reiterated his stance that he does not think unemployment insurance is holding workers back, but even if it is, the extra payments are soon coming to an end.

“I see no evidence [unemployment insurance] had any serious impact on it. But you can argue it. Let’s assume it did. It’s coming to an end,” Biden said.

In Kansas City, Mo., restaurant owner Jerry Rauschelbach was optimistic that the cut in unemployment benefits would help drive more talented workers back to his industry. He has been looking for another manager for Arthur Bryant’s Barbeque for six months.

In the two weeks after the unemployment money scaled back in Missouri, Rauschelbach said he was flooded with applications for the manager position, but few had worked in the industry before.

“The type of employee applying is not what I’m used to,” Rauschelbach said. “The people applying are grasping for any job. I’m looking for somebody who is committed to the industry. It’s a hard life.”

The manager position pays about $50,000 a year and remains unfilled. Like many, Rauschelbach described this summer as both the best and worst of times - business is “hitting numbers we haven’t seen in years” as customers return and the mail-order meat business he started during the pandemic remains strong, but his staff of 20 is stretched.

He still thinks the generous unemployment benefits hurt hiring, but his recent experience has also caused him to realize a lot of Americans are reassessing their careers and no longer want to work 3 p.m. to 11 p.m. on Saturdays and Sundays.

Idaho Statesman business reporter John Sowell contributed.

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