Jimmy’s Colorado Politics Column | Cut off largesse to the unemployed

Written by on July 14, 2021

As downtown Denver businesses braced for the groundswell of patrons during the week’s MLB All-Star Game, one thing was already clear: they just don’t have enough workers.  The main culprit for this extraordinary problem is the ongoing unemployment insurance (UI) expansions.

The staffing shortage is real, and it’s ongoing.  One small market near Coors Field is even operating at only 45% staffing capacity.  Denver is playing host to one of the big sporting events of the year, and one of the biggest since the pandemic upended our lives.  Sure, it’s a boon to downtown businesses in many ways – but restaurants, bars and others are faced with skeleton crews and stressful circumstances.  Some have turned to friends, family and neighbors to help out just to keep up with demand. 

More than anyone else, this is on Gov. Jared Polis.

Despite having ended his pandemic orders and allowed businesses to return to full capacity – and even with nearly 60% of Coloradans vaccinated with at least one shot and 54% fully vaccinated – Polis insists on keeping Colorado’s UI expansions even as other states have ended theirs.

To be clear, I’m not talking about unemployment benefits themselves, but the expansions instituted during the pandemic.  Last March, Congress approved a $600-per-week bonus atop the base unemployment amount.  After its expiration in July 2020, Congress kept the weekly supplement but reduced it to $300.

Congress also extended UI benefit eligibility from 26 weeks (six months) to 79 weeks (18 months) and expanded eligibility as vastly as an applicant’s employment merely being “affected” by COVID-19.  Those provisions are set to terminate in September.

UI benefits are primarily implemented by states.  Polis could decide tomorrow to discontinue Colorado’s participation in the UI expansion and revert to the pre-pandemic policies.  He should.

Sure, the UI expansion was well-meaning.  If people are forced out of work by government, shouldn’t government also help keep displaced workers afloat?  Perhaps, but as a Democrat friend who works for a local chamber of commerce recently told me, “The expanded unemployment benefits were a good idea at the time, but now they seem to have backfired.”  I haven’t been surprised by this, but hearing a liberal say this is notable.

The reason why is pretty simple.  Keeping the UI expansion in place warps the incentive structures of our economy.  Incentives matter because they influence human behavior.

Unlike natural market forces in the private sector, when government puts a new law, policy or ordinance in place, it instantly changes incentives.  In May, I wrote about the dangers of the state and federal eviction moratoriums because the process of “no evictions” offers people an invitation to stop making rent payments altogether.  Reality bears this out, as many small-business rental property owners have found themselves in dire straits because of these moratoriums.

Similarly, if the government pays you more money to stay at home than you might receive by returning to work, it inherently discourages you from finding work until the well runs dry.  Consider the powerful plea of Mesa County’s three commissioners, who on Monday sent a letter to Polis advocating an end to UI expansion in Colorado.

“Mesa County’s May 2021 unemployment rate was 6%; however, our job openings are at historic highs,” they wrote. “Pre-pandemic, our unemployment rate for May of 2019 was 2.9%; however, our job openings are currently up 41% from where they were in May of 2019.  Our economy is tracking towards pre-pandemic numbers, but we need the available workforce to meet the demand of our economy.” 

In May, Colorado’s statewide unemployment rate stood identically at 6%, slightly higher than the national average.  Meanwhile, a recent LendingTree report listed Colorado as the fifth-ranked state with businesses that need workers, at 42%.  

In normal times, and if we have a low unemployment rate, this would be good news.  Under President Trump, we saw a vigorous job market with historic low unemployment (3.5%) and payrolls rising (especially among the bottom quartile), while the Labor Department’s monthly JOLTS report consistently reflected nearly one million more job openings than workers in the workforce currently seeking employment.

Thing is, unlike today, natural economic forces drove payroll increases and more job openings than available workers.  If anything, government policies which reduced the tax and regulatory burden on businesses helped encourage job creation and payroll increases.  Problems arise when the labor market is tight because of artificial government policies that needn’t be in place and put undue pressure on small businesses — exactly what we’re seeing now.

To encourage employment, Polis recently instituted his “Jumpstart” program to pay $1,600 per person who goes back to work for at least two months.  Nearly 19,000 people have signed up so far.  That sounds nice, yet I can’t help but scratch my head wondering why Polis is giving taxpayer dollars for people not to work while also paying people to work.

Unfortunately, however well-intentioned his efforts to help people during the pandemic, Polis has exacerbated a labor shortage.  It’s time he makes the hard calls now, lest he suffer significant economic (and political) fallout later.

Click here to read the rest of Jimmy’s July 12 column at Colorado Politics, a sister publication of The Washington Examiner.

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