Scapegoating unemployed is tired political trope. Here’s what works to fix labor shortages.

Generous benefits are not keeping people on the sidelines of employment.

Michael Rosen and Charlie Dee

Wisconsin’s labor shortage is not the result of lazy people gaming the unemployment system. Yet that’s the excuse Republican lawmakers used to pass, without a single Democratic vote, a series of bills intended to punish the mythical lazy workers, most notably by cutting unemployment insurance benefits to as few as 14 weeks and making it more difficult for those out of work to qualify for them.

These politicians believe benefits are so generous that they discourage unemployed workers from seeking jobs. Accordingly, Rep. Alex Dallman, R-Green Lake, claimed the purpose of these benefit-cutting bills was to “get people off the sidelines” for employers.

This idea that the unemployed should be punished back into the workforce has long been a trope for some business leaders and Republican officials. But when examined factually, it is glaringly wrong.

During the economic tailspin caused by the Covid-19 pandemic, millions of workers lost their jobs. In response, Congress recognized that unemployment checks were inadequate and responded by supplementing them with a $600 per week stipend; that was later reduced to $300 a week. As the economy began to rebound in the summer of 2021, labor shortages began to emerge, so some GOP-controlled states cut some or all of the extended benefits.

Now, if the myth about benefits being too generous were true, these red states should have seen a significant increase in employment rates, right? But that didn’t happen. According to an analysis by the Federal Reserve Bank of San Francisco, “…the enhanced UI benefits were not an important source of labor shortages in 2021.”

In addition, data released by the U.S. Labor Department after the benefit cuts found that the five states with the fastest rates of job growth in the nation all retained at least some of the federal benefits while states that ended some or all of the benefits experienced slightly slower job growth.

The punitive, scapegoat-the-unemployed approach doesn’t address any real problem and is bad economics.

First, our state and the nation are now experiencing record low unemployment, so where are all these lazy workers hiding? Second, their bills do nothing to address a skills mismatch between unemployed workers and unfilled jobs.

Google, Meta and Amazon are laying off tens of thousands of employees nationally. Is it reasonable to assume that these unemployed technology workers can be hired by manufacturing companies experiencing shortages of machinists, or hospitals desperate for more nurses? In addition, workers may have very legitimate reasons for remaining unemployed, such as taking care of a toddler while a partner works.

The GOP approach ignores what economists call the “automatic stabilizer function” that unemployment insurance provides for the economy.  By putting dollars into the hands of jobless workers, unemployment compensation ensures that demand for goods and services doesn’t collapse when unemployment rises.

A comprehensive study of these benefit reductions by a group of prominent economists found that “…unemployed workers lost an average of $278 a week” resulting in them cutting their spending by $145 per week. Drastically slashing benefits would undermine this stabilizer function, damaging Wisconsin workers, their families and the gas stations, grocery stores and mall shops they patronize.

What policies have economists identified that work to boost employment?

  • Join the rest of advanced economies in the world by providing high-quality, government-subsidized childcare. Even though Wisconsin already has a high rate of female employment, this would free even more women and men to join the labor force.
  • Recruit immigrants. While this would remove a prime Republican-stoked grievance, it actually works. Cities with the fastest growing immigrant populations over the period 2010- 2019 were all medium-sized cities with thriving economies: Charleston, Des Moines, Louisville, Columbus, OH, and Nashville. Immigrants have higher rates of entrepreneurship and labor force participation than the general population.
  • Increase investment in the Wisconsin Technical College System that has a demonstrated record of retraining unemployed and underemployed workers.
  • State and local governments should eliminate unnecessary four-year degree requirements for thousands of government jobs. Pennsylvania and Utah have demonstrated that creating alternative pathways to employment for people with associate degrees and related job experience actually works.
  • Raise the state’s minimum wage. If you want people who are not in the labor market because it is too expensive to be employed, raise wages and they will come.

Wisconsin’s workers and businesses deserve policies that address actual problems rather than mean-spirited, anti-worker legislation based on mythological grievances. Governor Evers should veto these counter-productive bills while citizens should demand that Republican lawmakers focus on policies based on sound economics.

Michael Rosen (Economics) and Charlie Dee (American Studies) are retired faculty from Milwaukee Area Technical College and formerly were leaders of American Federation of Teachers Local 212.