A Bureau of Labor Statistics state employment report released recently shows Colorado’s unemployment rate remaining unchanged for the third consecutive month despite 17,000 new jobs. Evidence suggests that the $300-per-week in added unemployment benefits could be exacerbating the problem, and Gov. Jared Polis refuses to do anything about it.
A survey conducted by the Colorado Restaurant Association from April 23 through May 7 reveals that “more than 90% of Colorado restaurants are currently having trouble hiring staff” and “65% of operators believe the primary hiring obstacle is workers preferring to remain on unemployment benefits.”
Similarly, a survey by the Colorado Chamber of Commerce found that “37% [of surveyed businesses] say that their company is currently experiencing difficulty hiring employees due to unemployment benefits exceeding wages.”
In an email, Colorado state director at the National Federation of Independent Businesses, Tony Gagliardi, echoed these concerns: “Colorado small businesses continue to struggle filling long-open positions. The supplemental unemployment payments combined with big-box stores raising their minimum wage has not helped. Forty-four percent of small businesses are reporting trying to fill open positions.”
There’s a saying in public policy: “If you want less of something, tax it. If you want more of something, subsidize it.” It should come as no surprise that subsidizing unemployment has encouraged more of it. With the additional $300-per-week in unemployment benefits extended under the American Rescue Plan Act, an individual in Colorado who earned $16 per hour while working can bring home more money by not working.
Bureau of Labor Statistics data bears this out. It shows that while Colorado businesses create thousands of jobs each month, they cannot find workers to fill them. Consequently, Colorado has the 15th highest unemployment rate in the nation at 6.4%.
Other states facing similar problems have concluded that the $300-per-week bonus check has exacerbated the labor shortage problem. Twenty-two states have announced that they will cancel the extra payments in an effort to encourage residents to fill job openings.
Meanwhile, officials in Gov. Polis’ administration still refuse to acknowledge that a labor shortage exists. President Joe Biden and other Democrats deny that the extra unemployment benefits contribute to higher levels of unemployment, instead citing factors such as fear of the COVID-19 virus and lack of child care. While these factors might play a role, a recent executive order by Polis signals that he holds a different view.
The governor’s office issued an executive order directing the Colorado Department of Labor and Employment to send $1,600 checks to individuals not working as an incentive to return to work. Polis’ Office of State Planning and Budgeting estimates that the order will cost taxpayers between $36 and $57 million.
By issuing this order, the governor has implicitly revealed his convictions on the matter. First, the order confirms his concern over a labor shortage. Why else would he feel the need to create such an incentive? But more interestingly, the governor apparently believes that financial incentives — not just fear of the virus or lack of child care—are preventing people from accepting open positions.
This begs the questions: Why not take away the incentive not to work rather than using taxpayer dollars to provide a new incentive to work?
In fact, taking away the $300-per-week additional unemployment check would amount to a much larger financial incentive than would the governor’s plan. The maximum amount a person can receive for returning to work under Polis’ plan is $1,600. Over the same time frame, the same individual could collect $4,500 from the $300 weekly bonus checks alone by staying unemployed instead.
Gov. Polis has revealed his hand. He clearly understands and believes that government has made unemployment too attractive for many people. Rather than spending taxpayer money to create an incentive to work, he should simply join the 22 other governors who are eliminating the much larger incentive not to work.
Ben Murrey serves as the Independence Institute’s director of fiscal policy.