Local economies loose federal dollars in failed labor-shortage solution

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Local economies loose federal dollars in failed labor-shortage solution

Below is a statement of Frank Knapp Jr., president and CEO of the South Carolina Small Business Chamber of Commerce, that addresses the effect of the state ending early federal unemployment benefits in an effort to force these workers back into the job market (see story in Yahoo/Finance).  The statement refers to a Moody’s analysis which concludes: “The preponderance of evidence suggests that reduced benefits are not the cure for worker shortages.”  Mr. Knapp’s statement also refers to the conclusion reached by the Chief US Economics at Oxford Economics: “Benefits discontinuation may end up doing more bad on the personal income ledger than good on the employment ledger of the economy.”

Local economies across South Carolina are losing tens of millions of federal dollars due to the state ending federal unemployment benefits two months early in a failed effort to force these workers to take available jobs.  As a Moody’s analysis shows, there has been little if any positive impact of the policy.  The state was warned well before June 30th, when the weekly federal benefits were to end, that stopping these unemployment benefits would not solve the labor shortage but instead, as one economist says, would be pulling personal income out of local economies, income that drives demand for small business goods and services.  We estimate that the lost income to local economies in South Carolina could be up to $46 million, which conservatively translates into a loss of $92 million in economic activity.

 

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