Few Midwestern states are providing premium pay to essential workers, despite American Rescue Plan funding
- The American Rescue Plan Act (ARPA) allocated $195 billion in fiscal recovery funds directly to states.
- One of the key uses of the funds was for premium pay for front-line workers impacted by the pandemic, which would disproportionately benefit Black and Brown workers and women.
- However, only two Midwestern states—Michigan and Minnesota—are using American Rescue Plan funding to provide premium pay (also called “hazard pay”) for low-wage essential workers.
- This breaks down to just 2% of funds allocated to Midwestern states being used for premium pay. Essential workers deserve better.
The American Rescue Plan Act (ARPA) presents a historic opportunity for state and local governments to shape their region’s economic recovery and also address the long-standing inequities that the pandemic continues to expose and worsen. One straightforward way that ARPA money could be used to combat these inequities is boosting the wages of the disproportionately Black and Brown workers and women who have been on the front lines of the public health and economic crisis. However, few Midwestern states have opted to do so; data on states’ allocation of ARPA funds thus far show few resources being put towards premium pay.
ARPA allocated $195 billion in fiscal recovery funds directly to states, with billions more also directed to counties, cities, tribal governments, and other units of local government. Interim rules developed by the Department of the Treasury designate four allowed uses for ARPA funds: including investments for infrastructure; assistance to households, small businesses, and nonprofits, and industries impacted; propping up state government services impacted by tax shortfalls; and premium pay.
Among the four uses, premium pay in particular would help lift up marginalized workers impacted by the pandemic. Premium pay” (also sometimes called hazard pay, even sometimes called “hero pay” by businesses) for workers “in critical infrastructure sectors who regularly perform in-person work, interact with others at work, or physically handle items handled by others.” This includes jobs in child care, health care, grocery stores, meat processing, transportation, and public health.
State and local governments also have additional flexibility to determine what is considered essential work and are encouraged to prioritize low-wage workers. States may provide premium pay of up to an additional $13 per hour in addition to the compensation they already receive, without exceeding $25,000 per eligible worker.
Premium pay is available under ARPA only to front-line workers who couldn’t work remotely and who faced “heightened risks due to the character of their work.” EPI research shows Black and Latinx workers are least likely to be able to work remotely and that Black workers and Latinx workers, especially Latinx women, have also experienced severe job losses during the public health and economic crisis due to their representation in industries categorized as essential work.
In health care, the largest front-line sector, women account for 76% of workers, yet are typically paid $5.12 less per hour than men in the sector. In the second-largest front-line sector—food and agriculture—half the workers are people of color. Sadly, due to the historic and ongoing influence of structural racism in the sector, food and agriculture also has the lowest-paid workers, with a median hourly wage in 2019 of $13.12 an hour.
For this aid to address the most inequities in wages and employment, it should be “targeted to the most vulnerable households and individuals.” The federal rules specify that premium pay should “prioritize compensation of those lower income eligible workers that perform essential work” [emphasis added]. A survey EPI commissioned in the late spring of 2020 found that only 30% of people working outside the home were receiving any kind of premium pay. By the fall of 2020, most large employers had ended premium pay, and while many states created premium pay programs using funding provided by the CARES Act, most of those ended in 2020. Two-thirds of low-wage workers don’t have paid sick days, even though the COVID-19 pandemic is still responsible for more than 2,000 American deaths every single day.
States in the Midwest are in a good position to offer premium pay if they want to. In addition to the billions in ARPA funds, the fiscal situation of Midwestern states is quite good; all Midwestern states ended Fiscal Year 2021 with a positive balance sheet, and nine of 12 Midwestern states saw revenues grow faster than the national median in 2021.
One objective of ARPA is to help states restore their lost revenue, and that purpose is largely being achieved with only a fraction of ARPA dollars. Much more is needed to address other critical objectives for ARPA dollars such as “supporting immediate economic stabilization for households” and “addressing systemic public and economic challenges that have contributed to the unequal impact of the pandemic.” And there is a particular need for premium pay in the region: Prior to the pandemic, median wages for Midwestern workers were “lower than those in any other census region.”
Despite the need for premium pay for essential workers in the Midwest, and despite the funds sufficient through ARPA to provide premium pay, we show below that most states aren’t providing any. And at least one state—Indiana—is using premium pay resources solely to increase policing and incarceration budgets without providing any relief to workers in the low-wage sectors discussed above.
Gave 24,000 essential state workers a 12% pay raise in 2020, but nothing with ARPA funds.
Indiana: A total of $10,500,000, for capitol police, state police, and Department of Corrections officers and employees who performed the work of Corrections.
Michigan: Made permanent a $2.35/hour raise, totaling $460 million, for direct care workers who work either in homes or in nursing care facilities. However, this covers only “registered professional nurse, licensed practical nurse, competency-evaluated nursing assistant, and respiratory therapist” occupations, and therefore excludes many essential workers in nursing homes, such as nutritionists, custodial employees, and physical therapists.
Minnesota: Approved $250 million in bonus pay, with eligible recipients and amounts to be determined by a joint executive-legislative working group. The group was supposed to have recommendations completed by September 7 but has missed that deadline. One of the working group’s members, State Senator Erin Murphy, has called for making more than $250 million available.
Missouri provided $73 million in premium pay to more than 18,000 state employees in fiscal year 2021, using CARES Act money, but has not allocated any additional premium pay from ARPA funds.
North Dakota: None.
South Dakota: None.
These states, in total, will receive $36 billion in ARPA funds. The $720.5 million allocated to hazard pay for essential workers constitutes around 2% of the available monies.
There is still time for Midwestern states to properly compensate low-wage essential workers for the risks they have and continue to face during the pandemic. Premium pay can be made retroactive dating back to the beginning of the pandemic emergency, so there is still time to assist workers who have not received compensation. Nine of the 12 states haven’t spent even half their allocated ARPA funds yet.
We have maintained since ARPA passed that the time to spend those funds is now, not only to keep the economic recovery moving, but also to assist low-wage workers and their families in building back a better economy than the one we had going into 2020. ARPA funds offer a critical opportunity to support workers on the front lines while also addressing long-standing racial and gender inequities workers experience. Premium pay for these workers is one step toward reducing these long-standing inequities and making sure that every job is a good job.
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