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How Cutting Unemployment Benefits Is Affecting U.S. Workers in Different States

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On April 1, the U.S. hit a peak of administering more than 4.3 million vaccines in a single day. But it almost seemed like an April Fool’s joke, as the daily dose numbers have since continued to drop. On May 22, the U.S. administered just 746,889 new doses.

About half of U.S. adults ages 18 and up are fully vaccinated, but the drop in daily doses is disconcerting for anyone hoping that we’ll reach the unlikely herd immunity threshold because of vaccine hesitancy among a large percentage of the population.

But as more people get vaccinated, albeit at lower rates, the CDC has changed its guidelines on masks for vaccinated people and many states are approaching some sort of new normal.

And with that, jobless claims reached a COVID-era low in the week ending May 15 with an initial jobless claims total of 444,000, according to the Labor Department. It was the lowest since March 14, 2020, and was slightly better than the Dow Jones prediction of 452,000 new claims.

But the lower jobless rate is not making things better for the millions of people who still are unemployed. Now, many states are abandoning federal unemployment benefits—which has included an extra $300/month under the American Rescue Plan—as early as June 12, despite the benefits being slated to last through September.

Debt and unemployment

The surge in unemployment early in the pandemic led to millions of Americans filing jobless claims, overextending the Department of Labor and causing delays in the system.

Surprisingly, credit card debt dropped even among people who were struggling financially before COVID-19, according to the Consumer Financial Protection Bureau. This suggests that, to some degree, extended unemployment benefits and stimulus checks helped keep people afloat.

If you’re still facing unemployment and looking for a way to reduce or speed up your debt repayment to alleviate some stress, you could consider debt consolidation. A debt consolidation calculator can help you determine potential savings and estimate a debt-free date.

States cutting extra unemployment benefits

There are 23 states planning to cut the extra $300/month in unemployment benefits—which will affect nearly 4 million unemployed workers—because of concerns that the additional cash will deter workers from applying for jobs. Of course, the minimum wage in 11 of these states is just the (bare) federal minimum of $7.25.

And in four states—Alabama, Mississippi, South Carolina, and Tennessee—there is no minimum wage.

Only two of the states—Arizona and Montana—will implement additional stipends or bonuses for returning to work because of the loss of additional benefits.

The minimum wage dilemma

States could consider raising the minimum wage (or implementing a living one) to entice workers. Look how it played out for Klavon’s Ice Cream Parlor in Pittsburgh. The shop more than doubled its hourly wage from $7.25 to $15/hour and was flooded with more than 1,000 applications in a week.

The ‘Fight for $15’ is really a compromise among those advocating for workers’ rights to earn a living wage. Based on inflation, the minimum wage should be $24 in 2021.

It’s not that people don’t want to work. They just want to be paid a living wage for the work they do.

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