DES MOINES, Iowa — Iowa is nearing passage of a dramatic reduction in unemployment benefits to try to force people to fill thousands of open jobs and reverse a trend in which the governor argues the state's “safety net has become a hammock."
A measure supported only by the Republicans who control the Legislature would reduce allowable unemployment payments from 26 weeks to 16 weeks, placing Iowa among only six states with such severe limits. Currently, 40 states plus Washington, D.C., and Puerto Rico pay up to 26 weeks of unemployment benefits, and Iowa has held to that standard for nearly 40 years.
The proposed reduction, which is expected to be approved soon, comes as Iowa's unemployment rate dropped to 3.5% in February and the state's businesses have struggled to hire enough workers, typically for lower wage jobs.
GOP Gov. Kim Reynolds has made the cutbacks a priority, arguing programs such as unemployment benefits are too generous and discourage people from working. Last summer, she halted an additional $300-a-week federal unemployment benefit three months early because she claimed it was in part to blame for a labor shortage.
“The safety net has become a hammock,” she told lawmakers earlier this year.
Other Republican-run states have taken the same approach.
Republican lawmakers in Kentucky last week voted to override their Democratic governor’s veto of a similar unemployment measure that would cut benefits from 26 weeks of eligibility to as few as 12 weeks. West Virginia lawmakers are considering a similar bill.
Arkansas and Kansas also pay 16 weeks, while benefits end after 14 weeks in Alabama and 12 weeks in Florida. Georgia offers as little as 14 weeks and North Carolina as little as 12 weeks.
Iowa Republicans note that Iowa has nearly 86,000 jobs posted and too few workers to fill them.
However, Democrats said only one-third of the available jobs pay a wage sufficient to support a family of four and they contend benefit reductions will not help fill open jobs.
“You are breaking something that is working for Iowans," said Democratic Sen. Janet Petersen. “This bill is heartless.”
Last year, about eight states considered such measures, said Michael Leachman, a spokesman for the Center on Budget and Policy Priorities, a Washington-based nonpartisan research and policy institute. In the 10 states that now offer less than the 26-week maximum of benefits, the labor force participation rate is 60%, compared to 63% in states that maintain the 26-week maximum.
“The state’s lawmakers are making a mistake. Cutting jobless workers off so quickly from benefits they’ve earned will hurt those workers and their families and do little to boost labor force participation," Leachman said. “In fact, labor force participation rates are worse on average in states that have reduced the maximum duration of benefits, as Iowa is doing in this bill.”
Lawmakers should instead focus on boosting worker pay, improving worker conditions, and assuring that parents can find affordable, quality child care, he said.
Researchers also have found that earlier efforts by Iowa and other states to reduce unemployment benefits did not cause the workforce to grow more quickly than in states that maintained the payment.
Iowa, like many states, lost tens of thousands of people from the workforce due to the coronavirus pandemic. Many were retirement age employees who left work permanently and women who couldn’t find affordable childcare.
Those trends are reflective of a national workforce problem but Iowa still lags behind the U.S. in recovery of its workforce. The state’s labor force — those working or looking for work — was about 2% lower in February than it was in February 2020, according to the U.S. Bureau of Labor Statistics. The U.S. labor force was nearly restored at about 0.4% lower than two years ago.
Republican Rep. Michael Bousselot has taken the lead in pushing through the Iowa benefits cut, saying he's responding to complaints that businesses can't find enough workers.
“It recognizes we have more jobs available than folks working or folks who can fill. It recognizes that with the supply chain crisis that we face, with the inflation that families face getting back to work is more important than ever,” he said.
The proposal also would make unemployed workers take a lower paying job sooner or risk losing their benefits.
Iowa businesses pay a tax amounting to about $400 million annually that funds the Unemployment Insurance Trust Fund, and the nonpartisan Legislative Services Agency estimates the reductions backed by Republicans would trim that cost by $100 million a year.
Both the House and Senate approved the benefit cuts, but the Senate version also forces unemployed workers to wait a week before getting their first check. The House now must approve the Senate addition or the chambers must work out a compromise.