Cuts to unemployment benefits didn’t get people back to work, study finds

A job seeker fills out an application form during a restaurant and hospitality career fair in Torrance, California on June 23, 2021.

Eric Thayer / Bloomberg via Getty Images

The state’s withdrawal from unemployment programs during the pandemic era is not accelerating job recovery, according to a new analysis.

Since mid-June, 25 countries have ended their participation in at least some of the programs. Louisiana, will do so on July 31st.

These measures provided assistance to the long-term unemployed, gig and other workers who were not eligible for traditional government benefits, and raised wages by $ 300 a week.

State governors, mostly Republicans, said the federal funds will prevent recipients from looking for jobs, making it harder for companies to recruit and slowing economic recovery.

However, according to Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, the data from the Census Bureau suggests recipients were in no rush to find work in the weeks following the first series of state withdrawals.

In particular, the proportion of adults receiving unemployment benefits has fallen sharply (2.2 percentage points) in the dozen states that cut federal funds on June 12 or 19, according to Dube. This corresponds to a 60% reduction in unemployment rates in these states, he said.

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But there was no corresponding increase in employment in this group – in fact, the proportion of adults with a job fell by 1.4 percentage points over the same period, according to Dube. (Employment rose 0.2 percentage points in states that did not end the pandemic benefits.)

Taken together, the data shows there was no immediate job boost after the cuts, Dube said. However, more time and information will be needed to analyze the longer-term effects of government policies, he said.

“There is no early evidence [federal benefits] were a big limitation [on jobs]”Said Susan Houseman, director of research at the WE Upjohn Institute for Employment Research, who reviewed the results.

The analysis uses the latest data on 18- to 65-year-olds from the Household Pulse Survey, available through July 5. The Census Bureau publishes new survey data every few weeks. It is one of the few publicly available real-time information sources that measures both employment status and receipt of unemployment benefits, Dube said.

His results are in line with recent analysis by the job site Indeed, which found job searches were muted in states that cut federal benefits. That is the opposite of what would be expected given the political goal, said business economists.

“You could argue that it might take people longer to find a job than a few weeks,” said Houseman. “We have to follow up [it]. “

labour market

Serious talks about labor shortages began following the April job report. The US economy created 269,000 new jobs this month, about a quarter of the forecasts made by economists. (Job growth has since increased to 850,000 in June.)

According to Stan Veuger, a senior fellow at the American Enterprise Institute, a right-wing think tank, the large deviations from economists’ forecasts in recent months suggest that the labor market is no longer functioning as it was before the pandemic.

The expanded unemployment benefits likely resulted in at least some people staying home instead of looking for work, he said.

But many other effects are also likely to play a role, says Veuger. He cited that Covid’s health risks remain; School schedules can make it difficult for parents to find steady work; Workers who have moved may not have moved out yet; and decimated industries will likely take a while to rebuild.

Coronavirus concerns are the main driver behind the lack of urgency among unemployed people, according to a recent survey by Indeed. An increase in cases due to the delta variant threatens to make economic recovery more difficult.

“I think there are a lot of these pandemic-related effects that we can’t control,” said Veuger. “You don’t jump right back into your old equilibrium.”

States have also reimposed job search requirements as a condition for receiving unemployment benefits, making it difficult for people to take advantage of the system, Houseman said. States had suspended these requirements earlier in the pandemic.

“They don’t exactly make it easy for people to get these benefits,” she said.

However, there are some reasons to wait for more data before drawing conclusions about state unemployment policies, Veuger said.

For example, Dube’s analysis does not control the differences in the labor market between states. The states that ended federal benefits early are also usually the ones that reopened early after Covid lockdowns. As a result, job searches could be lower compared to other states if some of the more easily recovered jobs are already filled, Veuger said.

Dube notes that he did not control government factors in his research, but was confident in the results as there have been no “systematic differences” between these groups of countries in recent months.

The Census Bureau data also shows a nearly 4 percentage point increase in self-reported financial distress in states that have ended or reduced unemployment benefits due to pandemics, Dube noted.

“The hardship numbers shouldn’t really change if it were easy to switch and get another job,” he said.

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