Montana opts out of federal unemployment payments, creates $1,200 incentive

Montana will opt out of several federal programs that helped boost unemployment payments at the same time it offers $1,200 one-time payments to those starting new jobs.

It’s an attempt to both incentivize and push the roughly 10,000 people the state estimates are still out of work because of the pandemic, and help employers who are desperate to find employees.

The $15 million for the bonus payments will come from the $2.7 billion sent to Montana from the federal government under the American Rescue Plan Act. 

As it moves to provide those supplemental payments, the state said on June 27 it will end four provisions that boosted unemployment payments.

Montana will stop $300 supplemental payments to people claiming unemployment benefits. The federal program paying for that is set to expire in September. There were 25,240 people receiving that benefit Tuesday, which is all the people receiving unemployment payments in the state.

The state will also drop out of a program that extended unemployment benefits to self-employed, the underemployed, independent contractors and individuals who have been unable to work due to health or COVID-19 affected reasons. That group of people numbered 8,540 claimants Tuesday.

Also ending is a program for people who had both traditional W-2 income and self-employment income. The number of people receiving that benefit as of Tuesday was 92.

And payments will end for people who hit the maximum for traditional benefits but were still getting payments through a federal program meant to target those affected by COVID-19. That federal program is also set to end in September. There were 7,182 people claiming that benefit as of Tuesday. 

Additionally, the state is reinstating a provision that those who receive benefits show they are actively seeking work. That rule was lifted under emergency rule-making authority by former Democratic Gov. Steve Bullock in March 2020. The new administration of Republican Gov. Greg Gianforte went through the rule-making process to lift that change, also effective June 27.

Republicans have been critical of the additional unemployment payments, meant to bring the share of a person's lost wages closer to what their lost income was. That's because in some cases a person earned more through unemployment payments. That generally happens with lower-income earners who saw their pay dramatically increase from an additional $300, or the previous $600 federal supplement.

A report from the National Bureau of Economic Research found that enhanced unemployment payments and longer payment durations helped people gain skills that improve the functioning of the labor market.

In a press release Tuesday, Republican Gov. Greg Gianforte said "the vast expansion of federal unemployment benefits is now doing more harm than good."

"We need to incentivize Montanans to reenter the workforce," Gianforte said. "Our return-to-work bonus and the return to pre-pandemic unemployment programs will help get more Montanans back to work.”

The Economic Stabilization and Transformation and Workforce Development Commission unanimously approved the $15 million to provide $1,200 one-time payments for those who return to work. The group, created under the recently signed House Bill 632 to create the framework for how Montana will spend billions in ARPA funds, held its first meeting Tuesday.

House Minority Leader Kim Abbott, a Helena Democrat on the commission, said Democrats on the committee didn't know the governor's office planned to stop the federal payments when they voted for the bonus money.

Democrats hold a minority in the Legislature.

"We did not have the context for that. We should have had a conversation about that," Abbott said Tuesday after the meeting. "We didn't vet that policy in context. I believe the governor has the authority to pull the rug out from under these unemployed people if he wants to, but if I understood that we were swapping this in for necessary enhanced unemployment benefits that are keeping families financially stable right now, I would not have probably voted for it."

Scott Eychner, administrator of the Workforce Services Division of the state Department of Labor and Industry, said the bonus payments could target people who are still out of work because of the pandemic and help employers across the state struggling to hire.

The week of April 17, the last week data was posted, the department reported 23,693 people filing an unemployment claim. That figure was closer to 12,500 a week in the leadup to the pandemic before March 2020.

It spiked at 83,239 the week of April 18, 2020.

Eychner said there are about 14,000 job openings the labor department knows of across the state, and the program approved Tuesday could provide incentives to about 12,500 people. People would be eligible four weeks after starting a position.

"We could get to theoretically filling most of the job vacancy that's out there that we're aware of," Eychner told the commission.

Eychner said the program would run through Oct. 31 to allow people who have barriers to return to work, like the availability of child care, to apply for payments after school starts up again in the fall. The money would be available on a first-come, first-serve basis until funding runs out.

"We do feel there’s a very direct relationship between inflated claims and that population and the barriers they have (returning to work)," Eychner said.

Even before the pandemic closed schools last year and changed the landscape for daycares, Montana faced a severe childcare shortage and problems with affordability.

A report from the Department of Labor in November 2020 found that 57% of businesses indicated a shortage of affordable childcare options in their community, and 40% said that was affecting their ability to recruit and retain qualified workers. That figure was 45% for employers with non-traditional hours, like bars or restaurants.

Economist Bryce Ward said Tuesday that the state has roughly 40% more job postings than it normally would at this time of the year, an eye-popping statistic even more notable because it's happening in an economy that six weeks ago was only 5,600 jobs below pre-pandemic level.

Demand for workers is high, Ward said, because there's a lot of money sloshing around the state's economy. Total earnings from work went up in the fourth quarter of 2020 relative to 2019, even though employment was down, and people received stimulus checks.

"People are spending that money and businesses are anticipating as more people get vaccinated they're going to spend even more of that money," Ward said.

Because of that, Ward said, employment in the goods sector in Montana has already fully recovered and even grown.

That means that demand is high compared to the supply of workers. And the services sector, like tourism, accommodations, food service, arts and entertainment and recreation, is just now trying to ramp up.

"They're all doing it at the same time," Ward said.

Another factor is the low unemployment rate. Ward said by a report coming out next week, he expects to see see the state at pre-pandemic levels.

Montana's unemployment rate is 3.8%, nearly as low as it was before the start of the pandemic. That's left many employers around the state struggling to hire workers. And as rental and home prices have soared across Montana, employees are struggling to make ends meet.

"You also saw lots of stories about firms struggling to hire workers (before the pandemic)," Ward said.

Even if an employer touts $16-an-hour wages, that works out to roughly $1,950 a month in take-home pay. The average rent for a one-bedroom apartment in Missoula is about $1,000, meaning more than half of a person's salary would go toward rent.

High housing costs can be a hiring challenge, Ward said, both in the sense that it's hard to recruit a worker if they can't find a place to live and also that expensive rents or mortgages can drive up the base salary a job seeker will entertain.