Louisiana will cut off jobless benefits for nearly 100,000 self-employed residents beginning in August, prematurely ending a federal program that has helped musicians, contractors and so-called “gig workers” avoid financial ruin amid the economic turmoil of the coronavirus pandemic.
For those who will remain on the state's unemployment rolls next month, weekly benefits will be slashed in half – as Louisiana joins a growing list of states that are rejecting a federal $300-a-week boost in jobless benefits on the shaky premise that they’re causing a worker shortage.
Gov. John Bel Edwards agreed to opt out of the federal programs, five weeks ahead of their official expiration date, in exchange for support from GOP lawmakers and business groups for a modest, long-term hike to the state’s weekly unemployment benefits.
Under the compromise, hashed out in the final minutes of the legislative session, lawmakers authorized a $28 weekly boost to the state’s jobless benefits beginning in January 2022. However, to go into effect, the Democratic governor had to end the state’s participation in the "federal government’s supplemental unemployment benefits program” by the end of July.
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Edwards accepted the arrangement, and in June, the Louisiana Workforce Commission notified the federal government that it would opt out of the programs effective July 31. The move makes Louisiana one of the few states headed by a Democratic executive to turn off the benefits ahead of their official expiration on Labor Day.
In addition to the $300-a-week supplemental payments, the state indicated it would also end its Pandemic Unemployment Assistance (PUA), covering "gig workers," and Pandemic Emergency Unemployment Compensation (PEUC), which allowed people to receive jobless benefits past the state's 26-week limit. It also plans to do away with Mixed Earner Unemployment Compensation (MEUC).
For much of the legislative session, Edwards resisted calls to end the supplemental benefits early. He noted that, unlike the two dozen other states that opted out of the payments, Louisiana had an economy centered around tourism and visitors were just beginning to trickle back in.
To avoid making a "rushed decision," Edwards' administration hired longtime LSU economist Jim Richardson to analyze the impact the move might have on Louisiana's economy.
According to the report submitted to Edwards, and obtained by this newspaper, Richardson estimated that that if the $300-a-week supplemental benefits were kept in place, Louisiana’s unemployed workforce, collectively, would pocket up to $220 million in direct payments.
To match the economic activity spurred by those stimulus payments, Richardson argued that at least 40% of those currently on unemployment assistance – or nearly 59,000 people – would need to get a job in the month of August. The state's job search website, HiRE, included 50,000 open positions at the end of June, Richardson wrote.
Separately, Richardson estimated that the $28 bump in weekly payments would translate into an additional $143 million in benefits for unemployed workers over the next decade-a-half.
The report doesn't address the economic impact of lifting the benefits "gig workers" and other self-employed residents are receiving under the federal government's pandemic unemployment assistance. It also doesn't address the effect of nixing extended benefits for those who remain unemployed past the state's 26-week limit.
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Louisiana has among the lowest maximum unemployment benefits in the U.S., at $247 a week, and has the lowest average weekly benefit in the country, according to an analysis from the left-leaning Louisiana Budget Project. The state hasn't bumped its benefits in more than two decades, a fact that Edwards seized on in his support for the legislation.
“For a long time now Louisiana has had the smallest weekly benefit in the country. And we need to do better in that. Everything is a tradeoff. Reasonable people can disagree about exactly where you draw the line,” Edwards said at a press conference at the end of the legislative session.
Edwards also said he wanted to strike a "reasonable balance" between helping the jobless and assisting businesses that say they're having trouble finding people to fill their ranks. The state is still 155,000 jobs short of its pre-pandemic levels, and since September 2020, the state has added back around 3,700 jobs a month, Richardson wrote.
Still, it's unclear whether ending those $300-a-week payments will have the intended effect of pumping up the labor force. Under state law, workers are already required to search for jobs to receive benefits, noted Jan Moller, head of the Louisiana Budget Project.
"This $300 a week is not a license to sit on your couch until Labor Day," Moller said. "What is undisputable is that this is pure, federal money that you are taking away from being spent in Louisiana's economy."
Ben Zucker, co-director of Step Up Louisiana, which advocates for better working conditions for state residents, said the problem isn't a worker shortage, it's a "good job shortage." He pointed to a poll from Morning Consult which asked people receiving unemployment benefits why they turned down a job. Among the answers were childcare obligations, concerns with the coronavirus pandemic and paltry pay.
Stephen Barnes, an economics professor at the University of Louisiana at Lafayette, said labor shortages are holding back some of Louisiana's potential for economic recovery, but said it's unclear whether the supplemental payments are to blame.
“It is ultimately very difficult to judge in real-time if this is exactly the right decision or not,” Barnes said.
He said Louisiana in the next month is poised for growth, and thinks that with pent-up demand for regional tourism, there will be ample opportunities in the coming weeks for people to get reengaged in the economy.
"I suspect that as time passes, and we have more and more data, and get a clear understanding of this, that it will have ultimately been a close call and not something that dramatically changes the outlook for Louisiana's economy," Barnes said.