Outdoor dining tents under construction in Arlington, Virginia on February 5, 2021.
Liu Jie / Xinhua through Getty
More than 300,000 Americans lost their unemployment benefits prematurely during the Covid pandemic, according to a study released Tuesday by the California Policy Lab.
This is because many states account for unemployed workers, which has underestimated the severity of the recession, according to the analysis.
State unemployment systems have an automatic mechanism that pays additional aid to long-term unemployed during periods of mass unemployment.
These extended benefit programs can pay up to an additional 20 weeks of assistance, in addition to the typical six months of regular state benefits.
“Defects exposed”
But a poor design has led 33 states to end their expanded benefit programs since the fall of 2020, although long-term unemployment continued to rise, according to the report.
Nearly 315,000 people lost profits as a result, according to a conservative estimate from the analysis.
“The pandemic has exposed flaws in the way these triggers are currently designed, which has led to the elimination of automatic aid in many states when their workers experience an increasing length of unemployment,” Alex Bell said. , Thomas Hedin, Geoffrey Schnorr and Till von Wachter, who co-authored the report.
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States automatically pay extended benefits based on the “insured unemployment rate.” (Some states use an alternative measure.)
The IUR is the part of the labor force of a state that receives unemployment benefits. It differs from the unemployment rate of a state.
Most states offer extended benefits when the insured unemployment rate exceeds 5%. All states except South Dakota paid for these benefits at some point in the pandemic.
Insured unemployment rate
However, the insured unemployment rate only counts on Americans receiving regular unemployment insurance for the state.
It does not count that long-term unemployed workers receive assistance through extensions, such as the extended benefit program or any federal program created by the CARES Act. This means it can “exaggerate improvements in labor market conditions,” the co-authors wrote.
As a result, insured unemployment rates in many states have fallen below the 5% threshold, ending extended benefits in these areas.
In states such as Alabama, Maryland, Minnesota, Ohio, South Carolina and Virginia, a large proportion of people (approximately 20% to 30% of all workers receiving unemployment benefits) lost their jobs after the programs ended, according to the California Policy Lab.
Only 16 states were still paying these benefits as of March 27, according to the U.S. Department of Labor.
However, terminating the extended aid in this way is counterintuitive during high periods of long-term unemployment, according to the report’s authors.
According to the Bureau of Labor Statistics, about 1 in 4 unemployed workers in March had been out of work for at least a year.
“While several unique aspects of the Covid-19 crisis have exacerbated the issue, including high long-term unemployment rates, a greater propensity for the unemployed to claim benefits, and a high utilization of extended benefit programs, this design problem hinders the ability of the User Interface Program to respond to any serious slowdown, ”they wrote.
However, some of those who received the extended benefits may have been able to collect aid through temporary federal programs. The American Rescue Plan extended the grant until Labor Day.
Michigan officials, who ended their Extended Benefits program Saturday, said it would likely be the case for its residents.
“Fortunately, with the federal extensions implemented on March 27, it is likely that applicants who were in the extended benefit program could receive benefits through other federal programs, such as emergency unemployment compensation. for pandemics or pandemic unemployment assistance, ”said Liza Estlund Olson, acting director of the Michigan Unemployment Insurance Agency.
According to the Department of Labor, approximately 613,000 of the approximately 17 million people receiving unemployment benefits did so through extended benefits at the end of March.