Delta variant may fuel push to extend unemployment pay, experts say

A chef interviews a job seeker about hospitality employment during a job fair on June 23, 2021 in Torrance, California.

PATRICK T. FALLON | AFP | Getty Images

According to some labor economists, the rapidly expanding delta variant of Covid-19 could be a reason for Congress to extend federal unemployment benefits beyond its end in early September.

Rising Covid case numbers, largely due to the more transmissible strain of the virus, threaten to undermine the U.S. economic recovery around the same time federal benefits are due to end, they said.

Local outbreaks can cause consumers – both vaccinated and unvaccinated – to restrict personal activities like dining at restaurants and encourage parents to stay home when some schools introduce distance learning in the fall, for example, economists said.

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“It is certainly possible that we will see another round of economic contraction in certain areas if there is an outbreak,” said Eliza Forsythe, assistant professor and economist at the University of Illinois. “And the unemployment system will no longer be there for the people as it was last year.”

This is of course a hypothetical scenario. And there was little evidence of political will to continue the benefits after they ended on September 6th.

About half of the states, mostly Republican, withdrew from federal unemployment programs months earlier because they claimed benefits prevented recipients from returning to work.

But the momentum should be considered by Congress in light of the latest Covid statistics, some economists believe.

“We should think more about these what-if problems than we do now,” says Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.

Delta variant

According to the Centers for Disease Control and Prevention, the seven-day average of newly confirmed Covid cases rose to more than 26,000 on July 14, twice as much as two weeks earlier.

The CDC estimates that 58% of recent US cases were due to the Delta variant, which is more contagious than other strains. In some regions such as Iowa, Kansas, Missouri, and Nebraska, the variant accounts for almost 90% of new cases, according to the CDC.

The Chief Medical Officer of the White House, Dr. Anthony Fauci said in June that the Delta variant was “currently the greatest threat in the US to our attempt to eliminate Covid-19”.

“I think most of our economic policy is based on the status quo of the pandemic,” said Dube. “The pandemic economy is not necessarily over.”

Unemployment benefit

The rising number of cases was the reason why Congress in March 2020 first launched the benefit programs for the pandemic era through the CARES Act.

The unemployment system expanded significantly, helping those who had exhausted state benefits and those who normally were not eligible for state aid, such as the self-employed, gig workers and parents who had to look after their children at home.

However, economists are quick to point out that the current situation is different. Last year Covid vaccines were not available; Nearly 60% of American adults are now fully vaccinated. So far, the delta variant seems to be spreading largely among unvaccinated people.

People across the country seemed to have reduced face-to-face interactions as the virus spread rapidly. I think there’s no reason not to believe that this won’t happen again.

Eliza Forsythe

Assistant Professor and Economist at the University of Illinois

“If that’s the case, then extend it [unemployment] The program wouldn’t be worth it, “said Michael Farren, economist at the Mercatus Center at George Mason University.” You don’t need to extend the program, you just need more vaccinations.

The expansion of federal benefits could hurt the economy if, for example, policies cause some workers to delay returning to the labor market, Farren said. The risk that companies will automate certain jobs also grows the more difficult it is for them to fill a role, he said.

But there are some groups, like children under the age of 12, who can’t get a vaccine even if they want one, Dube said.

Outbreaks are more likely to be localized in areas with relatively low vaccination rates, Dube said. But in Los Angeles County, for example, officials said Thursday that the Delta variant requires masks indoors regardless of vaccination status.

Such mitigation measures could lead some residents, even vaccinated ones, to be more cautious about visiting indoor restaurants, bars, cafes and cinemas, which could lead to more layoffs, Dube said.

“People across the country seemed to be reducing face-to-face interactions as the virus spread rapidly,” Forsythe said. “I think there’s no reason not to believe that this won’t happen again.”

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