Workers aren't coming back because of low vaccination rates, not cushy unemployment benefits

insider@insider.com (Juliana Kaplan) 

© Provided by Business Insider Maryland National Guard Specialist James Truong (R) administers a Moderna coronavirus vaccine at CASA de Maryland's Wheaton Welcome Center on May 21, 2021 in Wheaton, Maryland. Chip Somodevilla/Getty Images

Of the states that opted out of federal unemployment benefits early, workers came back where vaccination rates were higher.

The more vaccinated states saw their headcounts increase by 11%, according to a Gusto analysis.

The analysis comes as the Delta variant rises across the country, and threatens the economy.

The labor market has a big puzzle at its center: Millions of Americans are unemployed, so why are so many workers not returning to work - or just quitting their jobs altogether?

More than half of the governors in America are blaming one thing: Enhanced unemployment benefits.

"Alabama is giving the federal government our 30-day notice that it's time to get back to work," Alabama Gov. Kay Ivey said in her announcement that federal benefits, which includes $300 in weekly benefits and programs that expanded both eligibility and the duration of benefits, would end early in the state. Yet, people still haven't rushed back to work.

That could be due to low vaccination rates, according to an analysis by economist Luke Pardue at payroll platform Gusto. That analysis found that workers over the age of 25 flocked back to work in states with higher vaccination rates; employment gains were led by states that had the most fully vaccinated adults.

Among the states that cut off benefits early, an average of 31% of adults were fully vaccinated



The six most vaccinated states in this group of 12- Alaska, Iowa, New Hampshire, North Dakota, West Virginia, Wyoming - had an average of 34% of adults vaccinated when governors announced the end of $300 in weekly federal unemployment benefits. Since April 2021, worker headcount across that group of six increased by 11%.

Meanwhile, the story was different in less-vaccinated states - Alabama, Idaho, Indiana, Missouri, Mississippi, and Nebraska, which had a cumulative average of 27% of adults vaccinated - prematurely cutting off benefits. Their headcounts grew by just 3% since April 11.

Significantly, according to Gusto, the two groups of states had similar employment trends until the announcement that benefits would be revoked. Once that came, "nearly all of the growth after the announcement dates is driven by growth in higher-vaccinated states."

The ongoing labor shortage is still mostly about health concerns

The data shows, again, how so-called labor shortages are still driven by the ongoing pandemic and its accompanying health and safety concerns. Currently, the more contagious Delta variant is responsible for the majority of cases in the US - and it's also emerged as a threat to the economy. The CDC is now recommending that even fully vaccinated adults should mask up in public indoors spaces in high transmission areas.

But even unemployed workers in states that haven't opted out of benefits early will soon be impacted: 20 million Americans will lose their benefits in weeks, but Congress isn't budging on extending relief - even in the face of another covid surge.