Dunleavy administration will cut unemployment benefits by ending $300 federal pandemic boost

The administration of Alaska Gov. Mike Dunleavy will cut unemployment payments starting June 12 to address a growing labor shortage in Alaska, the Alaska Department of Labor and Workforce Development announced Friday morning.

Commissioner Tamika Ledbetter said in a written statement that the state will stop distributing a $300-per-week bonus benefit provided by the federal government. That benefit was set to expire in September.

Critics said the change does little to address the root cause of the labor shortage, including a lack of child care, few out-of-state workers, and continued health concerns from the COVID-19 pandemic.

The change means Alaska’s unemployment benefits will top out at $370 per week for an Alaskan living alone, instead of $670 per week.

With Friday’s announcement, Alaska joins 16 other states that have already made similar cuts.

Patsy Wescott, director of the state division that handles unemployment, told reporters Friday morning that self-employed Alaskans will continue to receive unemployment benefits through a related federal program.

Ledbetter said the state’s decision to cut benefits was driven by anecdotal information from employers.

“We’re hearing from employers, we’re hearing from the business community, I’ve been reading a lot of the articles that you all have been writing, and there is a worker shortage,” she said.

The state’s available-jobs database has more openings than the number of people on unemployment, she said.

“And so we now have an opportunity to broker that connection of job seekers with those opportunities that are available. And so we want a strong economy. And that basically is why we made this decision. It’s time to help people get back to work,” she said.

The move is part of a wider trend, mostly among Republican-led states.

Alabama, Arizona, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Utah and Wyoming have said they will end the unemployment boost early.

[GOP governors slash jobless aid to try to force more Americans to return to work]

In those other states, governors have ended unemployment benefits to prod workers into taking jobs.

Republicans in the Alaska Legislature mostly praised Friday’s action. Senate President Peter Micciche, R-Soldotna, called it “a very positive move.”

“We are hopeful that this is going to bring some much needed relief to employers who are having a hard time finding candidates to fill jobs,” said Bill Popp, president and CEO of the Anchorage Economic Development Corp.

He said it remains to be seen whether the state’s action will help, because there are many other factors in play.

“It’s a simple supply and demand situation,” Popp said. “Demand spiked dramatically all at once. It had been ramping up already before. But then really took off here in the last few weeks since the restrictions started being lifted in Anchorage.”

Economist Nolan Klouda, executive director of the Center for Economic Development at the University of Alaska Anchorage, is seeing the same thing.

“Right now, it’s very unusual for so many employers to be hiring at the same time for the same kinds of jobs,” he said.

Many businesses are recruiting the same kinds of workers at the same time. At the same time, the supply of workers is lower than it normally is. Seasonal out-of-state workers aren’t generally available. Furthermore, some workers are staying home because they don’t have child care or remain vulnerable to COVID-19 because of other health conditions.

“This is an unprecedented situation,” said Dee Buchanon, statewide manager of marketing for Subway restaurants, which has more than 60 locations statewide.

“Subway is hiring everywhere. We cannot get enough employees,” she wrote in a recent letter to the governor’s office.

She agreed with Popp’s assessment and said child care is a major issue. Buchanon said she wasn’t able to speak on behalf of her company but has 20 years of experience in tourism marketing in the state and said she hasn’t seen a situation like this before.

The state normally welcomes thousands of out-of-state workers each summer, including thousands of foreign workers hired under the State Department’s J-1 visa program. That program has only just begun a restart after shutting down during the pandemic.

That has resulted in tens of thousands of open jobs within Alaska, according to listings on the state’s jobs board. Meanwhile, figures published by the Department of Labor indicate that in-state unemployment remains much higher than it was before the pandemic.

In March 2021, there were 31,841 Alaskans collecting state unemployment benefits, plus an unspecified number of self-employed Alaskans collecting federal unemployment. In February 2020, that number was just 10,369, less than a third of the current total.

But Klouda is skeptical that simply cutting unemployment benefits will force people into work.

If other factors are preventing them from finding employment, and they still can’t get help, “the likely consequence is that a lot of people who really can’t find work are going to be kicked to the curb pretty abruptly. I think that’s a likely scenario,” he said.

Others have echoed that concern. The Alaska AFL-CIO issued a statement condemning the decision to cut unemployment, and some state legislators said they think it’s a bad idea.

“I don’t think it’s a good idea, no,” said Rep. Ivy Spohnholz, D-Anchorage.

She said a lot of people used the pandemic to reconsider their lives, and the unemployment boost allowed them to go back to school or start a small business. If people remain unemployed, it’s likely not from a lack of effort.

[Analysis: It’s not a ‘labor shortage.’ It’s a massive reassessment of work in America.]

“People want to work,” she said.

Senate Minority Leader Tom Begich, D-Anchorage, said there’s little the Legislature can do to reverse the state’s action. He intends to appeal directly to Dunleavy, but legislators can’t force the governor to spend money.