OLIVIER DOULIERY | AFP | Getty Images
Millions of people will lose their unemployment benefits this weekend if pandemic-era government policies end.
Congress approved a historic expansion of the country’s safety net for the unemployed in March 2020 to help cope with the effects of the economic downturn caused by Covid.
The legislature has extended these temporary extensions twice, increasing the number of people entitled to unemployment benefits and the amount of weekly allowances for the recipients.
In the absence of Congressional action, this assistance will expire after Saturday or Sunday, depending on government regulations. Given the improvements in the economy and the labor market in recent months, it seems unlikely that lawmakers will extend the policy a third time.
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If that happens, about 8.8 million Americans will lose their accomplishments entirely, according to an estimate by The Century Foundation, a progressive think tank.
Another 3 million or so will cut their aid by $ 300 a week, the group projects. The average person would make about $ 321 a week, or about 38% of their pre-firing wages, without the allowance, according to Labor Department data.
“We cut the benefits if many, many people still rely on them,” says Till von Wachter, economics professor at the University of California Los Angeles and director of the California Policy Lab.
“This is a recurring problem in American recessions. We ask politicians to develop benefit programs and they set end and start dates,” he added. “They are set in advance and have nothing to do with the economy.”
The White House supports the scheduled termination of the $ 300 weekly bonus payments. Officials point to an average of 832,000 new jobs per month over the past three months and a drop in the US unemployment rate of 5.4% as evidence of a recovering economy.
However, the Biden administration urged states with high unemployment rates to continue paying benefits to certain groups after this weekend’s lockdown by using federal funds allocated to states by the American Rescue Plan. These groups include the long-term unemployed and workers such as independent contractors who are not eligible for traditional state aid.
However, it is unclear whether states will do so. The US Department of Labor is not following these decisions because the use of the funds is not under its supervision, a spokeswoman said.
Twenty-six states suspended most or all of federal benefits as early as June or July before they were officially suspended for Labor Day.
We cut the benefits when many, many people are still dependent on them.
Till von Wachter
Director of the California Policy Lab
Its governors, all Republican with the exception of Louisiana, said the improved benefits would deter people from looking for work and put a brake on economic recovery by exacerbating labor shortages.
More generous benefits have also resulted in more criminals targeting the unemployment system.
“Between massive fraud and labor shortages, the expanded unemployment insurance benefits were arguably the federal government’s flawed – and most damaging – economic policy in response to Covid-19,” said Rachel Greszler, a research fellow at the Heritage Foundation, a right-wing think tank, wrote in July.
However, the available evidence suggests that advantages may not have played a huge role in setting challenges.
In states that cut federal benefits in June, around 7 out of 8 unemployed workers who received benefits were out of work by early August, according to a recent study. This suggests that the withdrawal of benefits did not result in a large increase in employment and prompted households to cut spending on the local economy by $ 2 billion, the study found.
Spending cuts can be detrimental to jobs if consumers forego restaurants and other activities to save money.
According to Betsey Stevenson, professor of public policy and economics at the University of Michigan, lawmakers must weigh these net employment effects when making policy decisions. With regard to unemployment benefits, the question arises: does the loss of household income or the work-inhibiting effect of increased benefits play a greater role?
“People need the money more than we need to get the incentives right [at the moment]“Said Stevenson, citing available research.
Economists suggest that factors beyond unemployment benefits are likely to play a bigger role in employers’ difficulties finding workers.
For example, Covid health risks are still present, exacerbated by the highly contagious Delta variant, and roadblocks related to childcare have not yet fully subsided.