Wednesday, July 28, 2021

Cuts to Unemployment Benefits Didn’t Put People Back to Work, Study Finds

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A job applicant 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

State withdrawals from pandemic-era unemployment programs are not accelerating job recovery, according to a new analysis.

Twenty-five states have ended their participation in at least some of the programs since mid-June. Louisiana wants to do it on July 31st.

Those measures offered help to the long-term unemployed, touring workers and other workers ineligible for traditional state benefits and increased wages by $ 300 a week.

State governors, mostly Republicans, said federal funding was preventing beneficiaries from seeking employment, making it difficult to hire businesses and slowing the economic recovery.

However, data from the Census Bureau suggests that beneficiaries did not rush to find work in the weeks after the first batch of state withdrawals, according to Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.

Specifically, the proportion of adults receiving unemployment benefits fell dramatically (by 2.2 percentage points) in the dozen states that cut federal funding on June 12 or 19, according to Dube. That translates to a 60% reduction in jobless rolls in those states, he said.

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

Together, the data shows there was no immediate increase in employment following the cuts, Dube said. However, more time and information is needed to analyze the longer-term effects of state policies, he said.

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

The analysis uses the most recent data on people aged 18 to 65 from the Household pulse survey, which is available until July 5. The Census Bureau publishes new survey data every few weeks. It is one of the only publicly available real-time sources of information that measures both employment status and receipt of unemployment benefits, Dube said.

Their findings are in line with recent analysis published by job site Indeed, which found that job search activity was muted in states that cut federal benefits. That’s the opposite of what would be expected given the policy’s objective, the company’s economists said.

“You could argue that it may take longer for people to find work than a couple of weeks,” Houseman said. “We will have to keep tracking [it]. “

Work market

Talks about the labor shortage began in earnest after the April jobs report. The United States economy aggregate 269,000 new jobs that month, about a quarter of what economists predicted. (Since then, job growth has risen to 850,000 in June.)

Large deviations from economists’ projections in recent months behind the labor market not working the way it did before the pandemic, according to Stan Veuger, a senior fellow at the American Enterprise Institute, a right-wing think tank.

Expanding unemployment benefits has likely led at least some people to stay home instead of looking for work, he said.

But many other effects are likely to play a role as well, Veuger said. He cited that there are still health risks from Covid; school hours can make it difficult for parents to find stable work; relocated workers may not have moved yet; and decimated industries will likely take a while to rebuild.

Concern about the coronavirus is the main reason for the lack of urgency in the search for work among the unemployed, according to a recent poll made by Indeed. An increase in cases due to the delta variant threatens to complicate the economic recovery.

“I think there are a lot of these pandemic-related effects that we don’t control,” Veuger said. “You don’t immediately return to the old equilibrium.”

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

“They don’t exactly make it easy for people to get these benefits,” he 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 for differences in each state’s job market. States that ended federal benefits early also tend to be those that reopened early from Covid shutdowns; Therefore, the job search may be less compared to other states if some of the jobs that can be more easily restored have already been taken, Veuger said.

Dube notes that he did not control for state factors in his research, but expressed confidence in the results, as there were no “systematic differences” between these groups of states in recent months.

Census Bureau data also shows an increase of nearly 4 percentage points in self-reported financial distress in states that ended or reduced pandemic unemployment benefits, Dube found.

“The hardship numbers shouldn’t change much if it was easy to transition and get another job,” he said.

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