Iowa is short of workers.
Iowa is paying people more money not to go to work.
How do those two facts go together?
There is yet another example of government in action. Pardon us while we scratch our head and wonder exactly what is going on.
On July 4, Iowa Workforce Development increased the amount of maximum weekly benefits paid to unemployed Iowans and to workers injured on the job. The maximum weekly payment for newly filed claims increased from $605 to $651 for claimants with at least four dependents who earned about $50,000 a year before losing their jobs. It’s a 7.4 percent increase. How many people do you know who got a 7.4 percent pay hike in the last year?
State law mandates this increase in benefits, since it is tied to an annual review of wages covered by unemployment insurance. According to the state, the average annual wage for insured Iowa workers increased to $52,130.71 in 2020, compared to $48,455.86 in 2019.
We are not saying people who need assistance should be ignored. Iowa has always been a generous state, ranked seventh nationally for replacing lost income, with people on unemployment getting 47 percent of their income.
Aren’t there alternatives? If someone loses a job that paid $40,000 annually, why can’t they be asked to accept another, lower-paying position, with the state offering to make up the difference either through a direct payment or tax credit?
If the new job pays $30,000, provide $10,000 in replacement funds. But still, require them to return to work.
We need workers. Look around at any business you enter or drive past. Help wanted signs abound. The unemployment rate was just 3.9 percent in May, the most recent month where statistics were available.
There are plenty of jobs available. If someone wants to work, there are numerous opportunities.
Iowa Workforce Development director Beth Townsend said in May that there were more than 66,000 job openings on the department’s website.
“The overwhelming message we receive from employers these days is the lack of workforce that is adversely affecting their ability to recover from the pandemic,” Townsend said. “Our field offices are open and ready to help. We are very excited to return to providing the support and help we love to provide — helping Iowans find their next great job or new career pathway and helping employers find their next great employee.”
That sounds great, but the fact that we are providing more money for people to stay home certainly defeats the purpose. We have seen the impact the last year had on the state’s finances, as the Iowa unemployment trust fund dropped from $1.2 billion in February 2020, as the COVID-19 pandemic struck and many businesses either closed or laid off workers, to $976 million this summer. That’s a decline of 19 percent.
Will unemployment insurance tax rate for Iowa firms increase? So far, the state says no. But as more money is sent out to workers who won’t work, and companies struggle without enough workers, that remains an option.
Iowa has been supportive. We have been generous. We have not forced people to return to jobs when their safety was at risk.
But the pandemic is largely under control. Businesses are trying to resume normal operations. They want more workers, and we don’t need to offer more money for them to sit home.
We saw this coming, and the Iowa Association of Businesses and Industry tried to get a bill passed during the 2021 session to reduce benefits. It failed.
Gov. Kim Reynolds was one of 25 Republican governors to reject continued federal payments to the unemployed. Those $300 payments ended on June 12, and we think it was the right call.
“Regular unemployment benefits will remain available, as they did before the pandemic, but it’s time for everyone who can to get back to work,” Reynolds said in May when she announced the state would turn off the pipeline. “This country needs to look to the future, and Iowa intends to lead the way.”
But the increase in payments from the state are leading in the wrong direction on this. We need to encourage people to return to work, and giving them more money for not clocking in won’t solve a growing problem.