South Carolina Becomes 2nd State To Drop Federal Unemployment Benefits

South Carolina will stop federal unemployment benefits at the end of June as Republican Gov. Henry McMaster tries to please businesses that are complaining they can’t find workers. 

The state will cease its participation in all federal unemployment programs, including an extra $300 per week and benefits for gig workers, on June 30. Congress first boosted benefits in response to the coronavirus pandemic last year. 

“We are currently facing a labor shortage created in large part by the supplemental unemployment payments that the federal government provides,”  McMaster said in a tweet. “Since the Biden Admin and Congress appear to have no comprehension of the damage being done the State of South Carolina must take action.”

Republicans and business owners across the country in recent weeks have complained that the federal benefits are causing a labor shortage by making life too easy for the unemployed. But the hallmarks of a worker shortage, such as low unemployment and rising wages, are absent from available data.  

South Carolina is the second state to cancel the federal benefits, which are unprecedented in their scope. Before last year, Congress had never added more than $25 per week to state benefits and had never expanded eligibility to the self-employed. Montana announced it would drop the benefits on Tuesday, and other states are likely to follow. 

Unlike Montana, South Carolina did not announce a plan to replace the benefits with a return-to-work bonus.  

The economic theory behind canceling the benefits is that losing the extra money will make life worse for the unemployed, who will therefore be more willing to accept jobs at the wages employers want to pay. 

But employers complain of labor shortages regardless of whether workers are getting federal benefits. South Carolina businesses complained vigorously about a worker shortage in 2019, before Congress had added extra benefits. 

Back in 2019, at least, South Carolina was one of many states that had more job openings than unemployed people. The state Department of Employment and Workforce said Thursday that there are more than 81,000 job openings going unfilled because of federal benefits. 

There were 120,783 South Carolinians looking for work in March, according to the latest data from the U.S. Labor Department. 

Nationally, the federal benefits will remain in place until early September. The South Carolina Department of Employment and Workforce estimated the state would miss out on more than half a billion dollars by cutting the benefits early.