DeWine takes income from unemployed Ohioans, gives to business owners
Supplemental unemployment compensation (UC) from the federal government has been helping Ohioans make ends meet during the unprecedented economic dislocation the pandemic has caused. Gov. Mike DeWine’s decision to cut off the additional $300 a week on June 26, 10 weeks before the benefits expire, is cruel punishment for more than 300,000 Ohio workers and their families. But it also will cost Ohio businesses close to $1 billion in spending that will never happen. As The Plain Dealer noted, that’s how much federal money Ohio is turning away. Since economists say each dollar of UC provides an overall kick of $1.61 as it recycles through the economy, we’re actually losing even more. Think of all of the businesses that won’t now see that spending. When you think of what Ohio would do to attract that kind of outside money, it’s enough to make you shake your head.
But there’s another side of this equation. Even while DeWine is flushing $1 billion of federal money down the toilet, he proposes to take another $1.46 billion of federal money and use it to wipe out the U.S. debt that Ohio businesses have accumulated paying UC benefits since the pandemic struck. That’s a quarter of the direct funding the state of Ohio is receiving under the American Rescue Plan Act, and more than half of what it will get this year. This money will reduce employer taxes from what they otherwise would have had to be to pay off this debt.
So what’s going on here? We are cutting benefits, paid for by the federal government, to unemployed Ohio workers, while using other federal funds to bail out Ohio employers. As of May 20, 17 other states and the Virgin Islands had loans from the federal government — but most did not. The pandemic did not cause all states’ trust funds to go broke. Ours did because state lawmakers hadn’t appropriately funded it for years. Employer taxes fund the Ohio UC system, and such taxes were the same or lower than the national average every year but one between 1996 and 2019. Ohio employers pay taxes only on the first $9,000 in each worker’s wages. Only nine states and Puerto Rico set that amount lower. Such taxes amount to less than half a penny on each dollar in wages.
This is a redistribution of income from unemployed Ohioans to Ohio businesses — and it forgoes the opportunity to use nearly $1.5 billion to help Ohioans fight the effects of COVID, whether by building our public health system, helping students and schools, or providing basic assistance to people and communities most affected by the virus. Between mid-April and mid-May, nearly one quarter of Ohio adults reported that it was somewhat or very difficult for them to cover usual household expenseslike groceries, rent or mortgage, and car payments. Years of policy choices that promoted segregation and discrimination have concentrated Black and brown Ohioans in some of the fields hit hardest by the pandemic recession such as child care, health care and food service. Cutting off the $300 supplement is more likely to hurt Black Ohioans than others, as unemployment is higher among Black people, who represent an outsized share of UC claimants.
Policy Matters Ohio previously has explained why Gov. DeWine should maintain the $300-a-week supplement. The pandemic has disrupted the labor market just as it is causing a shortage of microchips for carmakers and items ranging from lumber to used cars. Lawmakers can hardly expect all parents to be back on the job market when child care remains unavailable for many — for instance, the number of child care programs in 31 Southeast Ohio counties has declined by 17% since February 2020, according to the Corporation for Ohio Appalachian Development) — and a large share of state residents are unvaccinated. A variety of studies, including one from the San Francisco Federal Reserve Bank, have concluded that the $300 is not keeping a large number of workers from working.
The Ohio Chamber of Commerce made a proposal earlier this year to slash unemployment benefits. That proposal — put forward months before today’s talk of labor shortages — would have resulted in the elimination of the $300-a-week supplement and other special federal unemployment benefits. Corporate interests like the Chamber call on lawmakers to cut benefits irrespective of labor market conditions. Their arguments need to be taken with a very large grain of salt. Ohio needs the $300-a-week benefit to continue.