Unemployment benefits were smaller in May and didn't cover as many expenses, but governors are still ending them

• 25 GOP governors have decided to end federal unemployment benefits early amid the perception that ongoing labor shortages mean ample work opportunities.
• But workers may not be returning as expected due to weak business conditions and health concerns.
• Benefits will also be cut as more bills are due and consumer goods cost more.
• See more stories on Insider’s business page.

Much ink has been spilled on what, exactly, is going on with employment and the so-called labor shortage. As the country reopened, April’s anemic jobs report came as a shock. 

GOP governors in 25 states reacted by prematurely pulling the plug on federal unemployment benefits, citing beefed-up UI as a disincentive for returning to work. There’s also the ongoing perception that a labor shortage means ample opportunities for work are readily available.

But the story is more complicated than that. Some workers are rethinking work and low wages completely; others are finding a mismatch exists between their skills and the positions that are open.

For part-time workers, there are still a few significant factors holding them back from full-time work. Weak business conditions are the primary reason workers say they’re not working more than 35 hours a week, according to a new report from Morning Consult. Coming in at second is health and medical limitations, a reason that’s grown significantly over the past year. The number of workers citing childcare obligations also grew over the past 12 months.

That data seems to support findings from UBS economists. In a recent research note, a team led by Andrew Dubinsky said that the primary drivers behind the current shortage are COVID fears from older workers and the lack of childcare for workers with younger children.

As the New York Times’ Noam Scheiber reports, retail workers were worried for their own safety after the CDC released new masking guidance, prompting customers to start going into stores without masks — and not necessarily with proof of vaccination. 

“We have had so much Covid anyway, and that was with a mask mandate,” Janet Wainwright, a Kroger employee in Virginia, told the Times. “Without the mask mandate, we have a fear of the unknown.”

For some unemployed Americans, COVID fears factor into their current job searches, and fear of returning to a physical workplace.

Steve Consorte, 75, lives in a suburb of Phoenix, Arizona. Consorte told Insider that he was laid off in mid-March. While he does receive social security benefits, they’re lower than his peers, since he had to start drawing them early during the last recession.

He was on extended benefits, which will end July 10.

Consorte has asthma, and was hoping that the UI extension through September would help carry him through to when it would be safer to return to work. That may not be an option now.

“It’s a real problem being forced into this rushed situation,” he said, adding that GOP governors “seem to think that everybody can just drop everything and go right back to work tomorrow. It’s not going to happen.”

Consorte says the idea that high benefits are fueling broad labor-market reticence isn’t “much of an argument.” Rather, he thinks a lot of people are in situations similar to his, fearing for their safety, or needing to take care of kids or aging relatives.

When it comes to the $300 in additional weekly benefits, “I don’t think that was enough to keep most people from work if they really were able to work,” he said.

Indeed, the report from Morning Consult found that unemployment checks shrunk in May — and more workers were making less on unemployment than they had in their prior positions. Those payments weren’t going as far as they previously had, covering two-thirds of recipients’ basic expenses, a marked drop from 81% in April.

A cascade of bills and new costs may also be on their way. Of those surveyed with outstanding rent and mortgage payments, 60.4% expect to start repaying them in May, June, or July. That comes amidst the backdrop of 4 million workers seeing their benefits slashed, or expiring completely in June and July.

As the authors of the Morning Consult report write: “Decreasing the value of unemployment benefits remains a double-edged sword: While it may drive immediate increases in employment, it also risks draining the economy of income needed for spending.”

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