Premature cutting of unemployment benefits may have hurt state economies.


when states begin cutting federal unemployment benefits Governors this summer argued that the move would force people to return to work.

new research He suggests that expiration of benefits does indeed lead some people to find jobs, but many more are not working, making them – and perhaps their state’s economies – worse.

A total of 26 states, all but one with Republican governors took action to end extended unemployment benefits It’s been around since the pandemic started. While many business owners blame the benefits of deterring people from returning to work, their supporters argue they provide a lifeline to people who lost their jobs in the pandemic.

Extra benefits nationwide are expected to expire next month, although President Biden is on Thursday. promoted states. with high unemployment rates to use separate federal funds to maintain programs.

To examine the impact of policies, a team of economists used data from Earnin, a financial services company, to examine anonymized banking records of more than 18,000 low-income workers who received unemployment benefits in late April.

The researchers found that expiration of benefits had an impact on employment: In states that cut benefits, about 26 percent of people in the study were working in early August, compared with about 22 percent of people in states that retained benefits.

But many more people could not find work. In the 19 states that terminated programs for which researchers had data, nearly two million people lost their benefits altogether and one million had their pay cut. Of these, only 145,000 people found employment due to the blackout. (The researchers argue that the actual number is likely even lower, because the workers they worked for were most likely to be severely affected by the loss of income, and therefore may not have been representative of everyone who received benefits.)

The cuts in benefits left unemployed workers worse off on average. Researchers estimate that workers lost an average of $278 per week due to the change, making just $14 an hour. They compensated by reducing spending by $145 a week – a roughly 20 percent reduction – and thus investing less money in their local economy.

“After firing these people, the labor market didn’t explode,” said University of Toronto economist Michael Stepner, one of the study’s authors. “Many of these people can’t find jobs and it will take a long time for them to get their earnings back.”

Consistent with the findings other recent research he found He said the extra unemployment benefits had a measurable but small impact on the number of people working and looking for work. The next piece of evidence will come Friday morning, when the Department of Labor will release state-level data on employment in July.

Coral Murphy Marcos contributing reporting.


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