This year will bring new meaning to the adage “hindsight is 2020.”
The year unexpectedly became an experiment in emergency powers and unemployment insurance benefits. It remains to be seen how kindly history will look back on the pandemic-related lockdowns and prohibitions, but we’re already seeing the impact of using unemployment benefits to encourage dependency — and the effects of different leadership decisions on workers and the economy.
Though the media lavishes more positive, glowing praise on Gov. Andrew Cuomo than the New York body count warrants, it’s Gov. Kristi Noem of South Dakota who emerges as a battle-tested leader through this health crisis.
In 2020 hindsight, Noem will be vindicated for her early actions and forward-thinking, long-term approach. On top of creating a prudent healthcare strategy, loosening regulations to improve access to healthcare, and helping her state enter the pandemic on solid footing, she recently made the decision to help small businesses and support workers by forgoing any further financial boosts to the unemployment insurance program. States had seen a significant rise in work refusals and fraud because the unemployment insurance boost Congress implemented through the CARES Act meant workers were receiving more money by staying home than they could earn going back to their jobs.
Back in May, Noem and the South Dakota Department of Labor cracked down on work refusals, clarifying that refusing to work when offered your job back means you do not qualify for unemployment. Because of this effort, nearly 80% of the lost jobs have been recovered, and now, the state is forgoing extra money from the federal government — the state doesn’t need it.
Decisions like these take courage, and South Dakota’s workforce and small businesses are better off for it.
Small-business owners put everything on the line to weather COVID-19. They took out loans, cut their household budgets, and spent countless hours adapting their business models to a new normal. When state economies began to reopen, they did not expect to compete with the federal government for their own employees. It made a tough situation far worse.
About 68% of people collecting the weekly bonus benefit made more money sitting at home than going back to work. The average unemployed worker collected nearly $1,000 per week, totaling more than $50,000 per year. With that kind of competition, two-thirds of small businesses worried that their former employees would never return, and many experienced that reality firsthand when they tried to get them to come back to work.
The unemployment insurance boost took a safety net intended to help individuals weather a time of unprecedented economic uncertainty temporarily and turned it into a lucrative safe space for people to remain unemployed for the long term instead of returning to their jobs.
Not only that — it served thousands of dollars on a silver platter to fraudsters and scammers looking to take advantage of the chaos of our government programs. Between individuals refusing to return to work and scammers filing false claims for CARES Act money, it’s now estimated that fraudulent and wasteful spending in the unemployment insurance program has the potential to reach $26 billion this year — that’s almost as much as the unemployment program pays out to total claims during a normal year.
Noem made that tough choice to end the fraud-friendly gravy train, and now, it’s Congress’s turn to get to work and ensure the expired boost remains a footnote in history.
Senators and representatives can use their time at home during the current recess to listen to voters and small-business owners talk about their experiences. They’ll see just how unpopular paying people more not to work is. According to polling released by the Foundation for Government Accountability, more than half of all voters wanted the bonus payment to expire as planned on July 31, including 61% of independents.
The economy works when workers work. Our unemployment policy needs to reflect that.
Voters know we need people to go back to their jobs, and the job numbers support this view. A record 4.8 million jobs were added in June, and another 1.8 million in July, lowering the national unemployment rate for a third straight month. The jobs are coming back. The question is, will former employees come back to fill them? If Congress extends an unemployment bonus, I wouldn’t be too sure.
Congress is now in the driver’s seat at a pivotal moment in our recovery effort. We have the opportunity right now to have the hindsight view of 2020 be a comeback story, but it will require Congress to stay strong and resist the temptation to extend the unemployment benefit boost to keep us on a long-term path to return to a roaring economy once more.
Tarren Bragdon is the chief executive officer at the Foundation for Government Accountability.
