Iowa Gov. Kim Reynolds announces cut to federal unemployment benefits, citing need to boost economy

Tyler Jett
Des Moines Register

Angie Davidson already lost her income once during the pandemic. Now she's worried it will happen again.

Davidson, 45, of Wapello, applied for federal unemployment insurance benefits last year when the COVID-19 pandemic forced closures of the flea markets and farmers markets where she sold soaps and jewelry and read Tarot cards.

The money that she earned supplemented her husband's $3,500 monthly military disability check, the primary income for their family of five.

Iowa Workforce Development denied her application for benefits. She filed a challenge, and a judge ruled in her favor in September, but Davidson said she didn't receive any payments until late September. For months, she said, the family whittled its savings.

"It's really embarrassing to go to a food pantry," she said. "It just is. It shouldn't strip you of your dignity, but it does."

She said Tuesday she hopes her family won't have to repeat that experience this summer. Still, she's worried after Iowa Gov. Kim Reynolds announced the state will no longer administer Pandemic Unemployment Assistance or other federal unemployment programs beginning June 13.

Though the programs are paid for by the federal government, Iowa Workforce Development administers the actual payments, giving the state the ability to turn off benefits for workers.

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As part of the change, the state will end Federal Pandemic Unemployment Compensation payments, an extra $300 that all unemployed workers were scheduled to receive until September. The state also is ending Pandemic Emergency Unemployment Compensation, which extended benefits to workers who had received payments for the full 26 weeks under other programs.

In addition, the state announced Tuesday that it will resume counting unemployment claims against businesses, a practice Iowa Workforce Development halted in March 2020 as the pandemic forced shutdowns. The state charges varying payroll tax rates to employers depending on how many of their former workers have received benefits.

Reynolds said she is cutting unemployment benefits because business leaders have complained that they can't find enough job applicants. She joins Republican governors in Alabama, Arkansas, Mississippi, Missouri, Montana, South Carolina and Tennessee in ending the federal programs.

The U.S. Department of Labor reports data about the federal programs on a two-week delay, so it's not clear how many Iowans are in line to lose benefits. But as of April 17, about 33,000 workers in the state were receiving funds through Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, the two most-used programs.

"It's time for everyone who can to get back to work," Reynolds said in a statement.

Workers say there are still barriers to getting jobs

Some workers said Tuesday that the employment landscape isn't as open as state officials imply. Some aren't qualified for the jobs that are open. Others say they don't have child care at the hours that prospective employers demand.

Davidson said she feels conflicted about the order. A former chair of the Louisa County Republican Party, she generally feels uncomfortable with the concept of being on unemployment.

But she said she looks for jobs two or three times every week. She's found a lot of factory and trade jobs that she physically can't do. She said she can't keep up with the pace of restaurant work. The minimum-wage jobs she sees listed out of town don't feel like they're worth her time, especially when she considers the price of gas.

She said she's got a lead on some work that would be a good fit for her skills and pay a decent wage. She's hopeful.

"I don't want to be dependent on the government — 100%, I don't," she said. "But I don't want to have to take a job that is not going to pay me my worth to work there, just to be able to scrape by."

This is at least the second time this year that Reynolds has denied a federal benefit as part of the COVID-19 response. She said during a Fox News forum at the end of April that she also sent back $95 million that the federal government provided to pay for more coronavirus tests.

Business lobbyists praised Reynolds' announcement in statements Tuesday, while Democrats chided the governor. 

Iowa Association of Business and Industry President Mike Ralston said in a statement that Reynolds showed "decisive, strong leadership." National Federation of Independent Business Iowa State Director Matt Everson added that cutting the benefits will "alleviate a growing issue for our small business owners," who have had trouble finding workers.

House Democratic Leader Todd Pritchard said the governor had "thrown common sense out the window." Sen. Zach Wahls, D-Coralville, said Reynolds pulled "the rug out from under unemployed Iowans while we're in the grip of a worldwide pandemic."

Some researchers told the Des Moines Register on Tuesday that they doubted that cutting off the federal aid will result in more workers taking jobs. Andrew Stettner, a senior policy analyst at The Century Foundation, said employment did not seem to increase when the federal government's supplemental payments for unemployment benefits dropped from $600 a week in the early months of the pandemic to $300 at the end of July.

In Iowa, the number of employed workers the following month increased by less than 1% — much slower growth than the prior months, when the federal government was providing more money.

The extra $300 ceased last fall through the end of the year. But employment growth remained relatively flat during that time.

The federal government resumed the $300 payments in January. Employment in Iowa fell that month by 4,400 employees. The state then added added 15,000 jobs the month after, even as the $300 payments continued

"You’re seeing an ideological move with this," Stettner said of Reynolds' announcement. "It’s getting up there with (mask mandates). It’s not based on data or research or what’s best for the state, truly. It's based on what’s politically correct for your conservative state right now."

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Iowa State University research scientist Dave Swenson said unemployment is not the biggest problem with the state's economy. Compared to before the pandemic, the number of Iowans receiving payments under continuing unemployment claims — from both federal and state programs — has increased by about 38,000 as of April 17. But, according to the U.S. Bureau of Labor Statistics, about 94,000 Iowans dropped out of the labor force. These are working-age Iowans who are not on unemployment and are not looking for jobs.

Swenson said that could be because they don't feel safe at work, retired early or are rethinking what kind of career is best for them after the pandemic.

"The big issue isn’t whether we need to deal harshly with people who are unemployed and receiving benefits," Swenson said.

Employers say workers are increasingly hard to find

Yet company officials in Iowa industries ranging from manufacturing to restaurants have complained that they can't find employees. Some have told the Register they've never had so much difficulty hiring.

Donarene Grenell, the vice president of operations at ServiceMaster Green of Des Moines, a commercial janitorial company, said the business has struggled for about two months to find enough workers. 

She said the company normally has a long roster of potential employees to choose from. The company cleans buildings all over the metro, on both day and night shifts, and often has had a long stack of applications divided by location and preferred shift, she said.

Grenell declined to say how much the company is offering new employees. But she said it has raised hourly wages by "$2 to $3." 

She said she believes the increased unemployment insurance benefits are motivating workers to avoid job offers like hers. Neighboring fast food businesses are offering more than they used to, she said, making hiring more competitive. The opening in the Des Moines metro of Amazon.com warehouses, where the retail giant pays $15 an hour — more than double the Iowa minimum wage — makes hiring tougher, too.

"That’s a huge hit for us," Grenell said. "Our typical janitorial wages are not at that level. ... We have to take our customers into consideration. We can’t increase the wages that high without raising prices on costumers. We care about the customer. We don’t want to lose their business."

Kelli Gallagher, president of Dee Zee Manufacturing, said she also believes the federal unemployment benefits have kept potential workers home. She told the Register in a text message that she sees other companies desperate for workers all over town.

"There are help-wanted signs everywhere," she said.

Worker sees no well-paying jobs she's qualified for

Becky Swan, 45, of Russell, said she isn't sure what will happen when her federal unemployment insurance benefits end next month.

At the beginning of the pandemic, she said she lost her job at GasLand Express, which permanently closed its Chariton convenience store. She took a job at Subway in late October, but she said she contracted the coronavirus four days later and still has trouble breathing.

Swan said she is currently receiving about $400 a month in unemployment insurance. She has also picked up a part-time job at a local motel, working three days a week as a front-desk clerk. The job is new, and she isn't yet sure whether it will cost her the benefits.

Nevertheless, she knows they're ending for sure in a month. She said she's spent all of her savings to stay afloat, and she hasn't seen any well-paying jobs that she's qualified for in her area. She's applied for several jobs that yielded no response.

"There are no jobs here in general, even without a pandemic," she said. "When my work closed down, it was devastating for me. I knew it was going to be hard to get a job here."

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.