Unemployment benefits: don’t expect employment to skyrocket after the pandemic increase expires

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According to The Century Foundation, at least 7.5 million people are expected to lose pandemic unemployment benefits in the 26 states that still pay benefits. This flood of possible new contracts comes at a time when job offers are at a record high and companies are raising wages, offering bonuses and providing other incentives to attract workers.

So far, however, employment has not grown substantially faster in states that terminated benefits prematurely, according to government studies and data.

Improved jobless pay is not the only reason Americans may be reluctant to return to work, experts say. Other factors include continued health issues, problems finding child care, and a growing interest in changing careers. In addition, it may take some time until the impact of the withdrawal of benefits becomes clear.
The country had an early look at the effect of leaving this generous lifeguard after about two dozen states chose to stop at least one of the federal unemployment benefit programs in June and July. The governors, all but one Republican, argued that the measure would help alleviate the labor shortage facing companies in their states.
“This is what they expected, but it didn’t happen,” said Peter Ganong, an assistant professor of public policy at the University of Chicago who has studied unemployment benefits throughout the pandemic.

The reduction in benefits had a minimal impact, if any, on pushing people to work, experts said. But it forced the unemployed to cut their spending, which likely hurt local economies.

Historical expansion

When the coronavirus pandemic consolidated in the United States and revolutionized the economy about 18 months ago, Congress approved an unprecedented expansion of unemployment benefits. It was designed to provide people with a financial cushion that allowed them to stay home amid state-ordered blockades that cost millions of jobs.
In late March 2020, lawmakers approved a federal weekly increase of $ 600 in unemployment benefits for up to four months, causing approximately two-thirds of beneficiaries to earn more unemployment than they did in wages. Congress revived the supplement in a late December relief package, but reduced it to $ 300 a week. Democrats then expanded the momentum in early September as part of their $ 1.9 trillion U.S. bailout plan earlier this year.
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Lawmakers also created two more measures to help the unemployed that will end this week. The Pandemic Unemployment Assistance Program provides payments for the self-employed, self-employed, self-employed and certain people affected by the pandemic, while the Emergency Unemployment Compensation Program expands payments for those affected by the pandemic. who have exhausted their usual state benefits.

President Joe Biden recently said states can use federal aid funds to extend programs beyond Labor Day, but so far no one has said they would.

Lose profits

More than 2 million laid-off Americans stopped receiving unemployment benefits and another million people saw their weekly payments cut by $ 300 to states that ended their programs in June.

But only one in eight workers who lost benefits found work Aug. 6, said Michael Stepner, an assistant professor of economics at the University of Toronto, who recently published a study on early termination of benefits.

Stepner worked with a team of researchers from Columbia University, Harvard University and the University of Massachusetts at Amherst. Based on data from Earnin, a financial services company, they examined the anonymous bank records of more than 18,000 low-income workers receiving unemployment benefits in late April.

Expect a similar result after payments are completed nationwide.

“It’s a matter of magnitude,” he said. “Will we see an increase in employment? Yes. Will this increase in employment be large? No, it was not large when these initial groups of states withdrew their profits.”

Another analysis by Jed Kolko, chief economist at the workplace, in fact found that while employment grew between May and July in states that terminated benefits prematurely, it also recovered. be in the states that continued payments.

Therefore, employers may have to temper their expectations.

“We may not see a big effect on employment growth because we have seen similar employment growth since May in both types of states,” said Kolko, who examined the federal data.

Another complication is that many of the people who have been helped by pandemic programs may face higher barriers to finding new jobs.

For example, those who are part of the pandemic emergency unemployment compensation program tend to be out of work for more than six months and the long-term unemployed often have more trouble finding new jobs than those most recently laid off, Fiona said. Greig, co-chair. from the JPMorgan Chase Institute, which has published several studies on unemployment benefits since the onset of the pandemic.

Similarly, those enrolled in the pandemic unemployment assistance program tend to be younger, with lower incomes, and more marginally tied to the workforce, and therefore may not be able to return to work as well. quickly, he said.

Companies that have problems hiring

Still, there are many anecdotal reports that indicate that people choose to stay home instead of work. Several employers have said they have difficulty finding jobs, even if they offer better pay, signing bonds and other incentives.
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About 16 percent of people who are not actively looking for work said the amount of money they receive from unemployment benefits and government programs makes it “not worth it to look for” work, according to a survey in early June. The U.S. Chamber of Commerce, which called for ending the $ 300 weekly supplement earlier this year.

“Ending the improved benefits will be an incentive for some people who have been reluctant to return to the workforce to return,” said Neil Bradley, head of chamber policy.

However, other factors also contribute to labor shortages, he said. About a quarter of respondents said Covid-19’s concerns, child care and other family needs, and lack of available jobs in sectors that are still suffering were the reasons why unemployed Americans were not looking. work.

“It’s almost impossible to isolate a variable in real time,” Bradley said, noting that the continued spread of the Delta variant may slow employment growth even after unemployment payments end.

A decrease in spending

While early termination of benefits may not have had much of an influence on employment growth, it probably had a greater impact on spending.

Unemployed people reduced their spending by $ 145 a week, or 20%, after making payments early, Stepner found.

This has major implications for local economies, favored by pandemic compensation and other relief measures enacted by Congress. States that ended the programs soon waived $ 4 billion in federal benefits in early August, causing spending to fall by $ 2 billion, he said.

“It’s money that would have been earmarked for local businesses, which can turn around and hire workers,” said Stepner, who noted that revenue only increased by $ 270 million.

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