Why Did Benefits End Early In So Many States
Citing labor shortages in the spring, 26 state governors claimed pandemic-related unemployment benefits were producing limited incentives for workers to take jobs. Many economists and analysts disagreed, highlighting several factors that prevented people from finding suitable work, including low wages, lack of health care, inadequate child care and fear of contracting COVID-19.
With unemployment claims still fluctuating as the economy struggles to return to pre-pandemic “normalcy,” reports are showing that the early cancellation of the federal programs had little impact on labor markets. A recent JP Morgan Chase Institute study confirmed that states that ended supplemental unemployment insurance programs during the summer saw a limited impact on job growth.
According to an August report by the Century Foundation’s Andrew Stettner, “Politics, not economics, drove the attack on unemployment insurance.” The states that cut off the enhanced benefits before the federal expiration were mostly Republican-led.
Arkansas, Indiana and Maryland were slated to cut off benefits early, but successful lawsuits forced those states to preserve the federal coverage, at least temporarily. In issuing their rulings, judges noted that the ending of benefits made it harder for the unemployed to afford basic needs. Lawsuits were also filed against state governors elsewhere, which were either denied by judges or are still held up in the courts.
But The Impact On People And Economies Is Very Real
In August, Dube along with researchers from Harvard University, Columbia University, and University of Toronto released a new paper looking at 19 states who withdrew benefits early. They found that ending benefits had a small impact on employment in those states: “For every 8 workers who lost their benefits, 1 worker found a new job.”
But the bigger hit came to spending and states’ economies. The researchers found that consumer spending in those states dropped by $2 billion “for every $1 of reduced benefits, spending fell by 52 cents.”
A from Julia Raifman, Jacob Bor, and Atheendar Venkataramani looked at the link between unemployment insurance and food insecurity. They concluded that UI “was associated with a 35% reduction in reporting any food insecurity and a 48% decline in eating less due to financial constraints.”
Julia Raifman
Now, an estimated 7.5 million Americans are set to lose all of their federal benefits in a matter of days, according to an analysis from the left-leaning Century Foundation. Dube’s research extrapolates that that could lead to $8 billion less in spending in September and October. It could also lead to a reversal in those food insecurity trends.
Million Workers Face Devastating Unemployment Benefits Cliff This Labor Day
What You Should Know
- An estimated 7.5 million workers will lose either PEUC or PUA benefits on September 6, 2021the largest cutoff of unemployment benefits in history, many times larger than previous cutoffs of 1.3 million workers in 2013 and 800,000 in 2003.
- The remaining safety net is only likely to cover less than 200,000 of these unemployed workers.
- In the face of the Delta COVID-19 variant, which threatens to keep some workplaces closed, theres a need to extend current benefits and permanently fix the unemployment programs so temporary extensions are not needed.
The COVID-19 pandemic unleashed an unprecedented wave of unemployment impacting a wide variety of Americans, from those who lost jobs when small retail businesses closed in the wake of necessary restrictions to caregivers forced to quit work when their childrens school switched to virtual learning. Starting with the CARES Act, the U.S. government took bold policy actions so that workers impacted by this epochal pandemic would not suffer long-term economic damage.1
In particular, regarding unemployment insurance, the federal government initiated three major programs:
Congress supported several other critical programs, including Mixed Earners Unemployment Compensation , and 100 percent federal funding for expansion of the existing FederalState Extended Benefits program and for work-sharing benefits .
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All Pain And No Gain: Unemployment Benefit Cuts Will Lower Annual Incomes By $1443 Billion And Consumer Spending By $792 Billion
Congress and the Biden-Harris White House have let expanded unemployment benefits expire in the middle of the ongoing COVID-19 pandemic, even while employment is still well below pre-pandemic levels. As a result, annual incomes across the U.S. will fall by $144.3 billion and annualized consumer spending will drop by $79.2 billion, according to the best available evidence on the effects of recent unemployment benefit cuts.
In March 2020, as the economic impact of the pandemic spread quickly, Congress critically expanded unemployment insurance benefits by providing $600 monthly supplements, extending benefit periods, and making previously excluded workerssuch as independent contractors and those with low incomeseligible for UI.
However, about half of states prematurely terminated these programs between June and late July 2021, and then, by letting the federal law expire in September, Congress and the White House cut off pandemic UI entirely. In total, more than 10 million workers lost all of their unemployment benefits because of either the state-level program terminations or the September program expiration.
Unemployment benefit cuts will significantly reduce income and consumer spending: Annualized income and spending losses due to unemployment insurance recipients losing benefits in June/July or September 2021
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Millions Of Californians About To Lose Unemployment Benefits As Federal Payment Cutoff Looms
Millions of Californians about to lose unemployment benefits
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Million Workers Will Lose All Benefits On Labor Day September 6 2021
As of the week of July 10, there were a total of 9.3 million Americans relying on one of the two main pandemic unemployment programs . As the recovery has moved forward, this total has declined steeply from 13.8 million at the end of February, and that decline is predicted to continue through the rest of the summer. Map 1 present provide estimates of how many of these workers will remain unemployed as of September 6 when the benefits will no longer be available. These estimates are based on the flows on these programs, current caseloads, and the rate in which workers have been estimated to have been exiting the programs.5
Based on rates of reemployment and when workers entered the program, our model predicts that there will be 7.5 million workers on these two programs when they come to an end. This includes:
Map 1
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The Delta Variant Is Complicating The Recovery
After dropping down below 10,000 earlier in the month, the new COVID-19 case count surged to nearly 125,000 in a single day by the end of July. While most prognistactors are not convinced that Delta variant will stop the forward momentum of the economy, it does complicate the jobs recovery.36 New indoor mask mandates in places such as Los Angeles and fears of infection may curb the resurgence in service sector demand and the need for workers, and the global struggle to contend with a more contagious variant continues to complicate global supply chains and the U.S. businesses that rely on them.37 Moreover, the Delta variant will contribute to legitimate fears among the unemployed that they will not be safe returning to work until the vaccination drive has reached a larger share of the populace. The resurgence of COVID-19 through this variant means that the United States certainly wont be past the danger of COVID-19 by fall, but still will be ending key pandemic unemployment benefit programs by then.
No Chance Of Extending Federal Unemployment Benefits
The expiration of the federal governments $300 weekly boost comes at a chaotic time for many American workers. As the nation grapples with cases of the contagious delta variant and the White House urges Americans to get vaccinated for Covid-19 , several states have reinstated indoor mask mandates to try to minimize the spread of the virus.
Although no large-scale economic shutdowns like those seen at the start of the pandemic have been announced, people job searching or who have just returned to the job market may be feeling less financially stable.
Since many have exhausted their state benefits, a wave of people will lose unemployment benefits once the federal bonus expires. Self-employed and gig workerswho will lose Pandemic Unemployment Insurance benefits created in 2020dont have state programs to fall back on.
In a letter last week, Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh reiterated President Bidens previous message that its appropriate to let benefits end in early September.
But ending the boost doesnt mean the economy is set up for smooth sailing after that.
Even as the economy continues to recover and robust job growth continues, there are some states where it may make sense for unemployed workers to continue receiving additional assistance for a longer period of time. Allowing residents of those states more time to find a job in areas where unemployment remains high, wrote Yellen and Walsh.
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Many Cut Off From Aid Early
While pandemic unemployment programs officially run until September, governors in 26 states withdrew early in June and July. The moves left some 1.6 million workers without any jobless aid over the last month, according to a statement from Andrew Stettner, a senior fellow at The Century Foundation.
Anna Keeton, 32, of Memphis, Tennessee, stopped receiving PUA benefits after July 3. They were furloughed from their EEG technologist job at a children’s hospital in March 2020, then received orders from a doctor to shelter in place due to an underlying condition that could increase their risk of serious illness if they contract Covid. Keeton has been unable to find new work due to a worsening medical condition and, until last month, said the PUA benefits, which amounted to less than what they earned while working, helped them stay current on essential bills and groceries.
Since July, Keeton has been getting by with financial help from friends and family. “If it weren’t for friends and family, if I didn’t have this community, I would be in my car,” Keeton tells CNBC Make It. “That’s if I could keep my car. If not, I’d be on the street or in a shelter.”
In Atlanta, Jennifer Askew, 39, said her PUA benefits were “a lifeline” to stay in her apartment, pay for utilities and buy groceries. The state of Georgia stopped providing PUA on June 27.
She’s frustrated lawmakers are letting benefits expire for millions of Americans like her, if they haven’t been cut off by their state already.
Workers Really Dont Know What The Fall Will Bring
When President Joe Biden signed the American Rescue Plan in the spring, the White House and lawmakers rather arbitrarily anticipated that it would be appropriate for unemployment benefits to end on September 6. They didnt anticipate some of the current challenges workers are facing, including the delta variant and an uncertain scenario for schools, that might render this a bad time to push the unemployed off a cliff.
There are myriad reasons people may not be able to return to work right now, or may be more hesitant to go back. Covid-19 cases and deaths are on the rise again. While the vaccines are available, many people are still nervous to get back out there.
Whether offices will reopen or businesses will close back down is uncertain. Some events are already being canceled, and offices are extending remote work, both of which have important implications for many jobs. Workers in the live events space expecting that work to come back might need to figure out if its time for them to change careers altogether instead of continuing to wait it out. Businesses in areas where there used to be a lot of office workers may not need to hire as many employees back soon, or ever.
We dont know what the fall is going to bring, but we do know its not going to bring a full recovery that suggests people dont still need support
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What Do Courts Often Require Before The Agency Can Change Its Mind About Whether I Get Unemployment
The agency should let you know that it wants to stop your benefits and why.
And it must give you a chance to respond before cutting your benefits off. It can do this by giving you a notice that you can appeal and an appeal decision before your benefits stop.
If your unemployment benefits were stopped and you were not given the reason why and a hearing before they stopped, Southeast Louisiana Legal Services may be able to help. Call our COVID-19 Helpline at 1-844-244-7871 to apply for free legal assistance.
The End Of Unemployment Benefits Will Actually Slow Economic Growth
Unemployment benefits are still pumping over $6 billion per week into the economy.33 With the cutoff of additional benefits, that number will crash down to $1 billion per week. Unemployment benefits have one of the highest multiplier effects of any form of government spending, and the end of this stimulus will slow the progress of the economy returning to its pre-pandemic trajectory.34 Personal income fell by 27 percent in the second quarter, after increasing 63 percent in the first quarter, leading to GDP growth that was strong but nonetheless fell short of Wall Street projections.35
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Women And Other Caregivers Will Lose Crucial Support Getting Back To Work
For the first time ever, Congress took dramatic action to ensure that caregivers who lost jobs during the pandemic due to their responsibilities taking care of children or family members ill with COVID-19 would receive assistance. Because of these challenges, there are still 1.79 million women who have dropped out of the labor force during the pandemic.10 Because they were not laid off, these workers are not eligible for traditional state unemployment benefits, but can receive federal PUA. With access to PUA gone, these workers will have no aid as they search for work.
Unemployment Benefits A Barrier
When Arizona Gov. Doug Ducey announced his state would end the federal unemployment supplement as of July 10, he said in a statement that businesses were having difficulty filling important positions.
We cannot let unemployment benefits be a barrier to getting people back to work, he said.
But statistics dont reveal why people do or do not return to work, some state officials say.
In Ohio, which ended the federal boost to unemployment benefits on June 26, the unemployment rate climbed from 5.2% in June to 5.4% in August, according to the Bureau of Labor Statistics.
The uptick might be due to more people actively looking for work but not immediately finding a job, Bill Teets, spokesman for the Ohio Department of Job and Family Services, said in an email.
Generally speaking, workforce participation has been increasing for a number of months,” he said, “and our number of continuing unemployment claims have also been trending downward for months. While combined these indicate we are in economic recovery, data cant tell us the motivation for people reentering the workforce.
Meanwhile, since Iowa Gov. Kim Reynolds announced in May that extra federal pandemic-related assistance would end June 12, there’s been a 236% increase in the number of people who have visited the state’s employment offices, said Jesse Dougherty, spokesman for Iowa Workforce Development. Additionally, initial jobless claims in the state dropped from 8,362 in July to 7,754 in August.
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