Pandemic unemployment benefits are ending nationwide the first weekend in September, but don’t expect to see millions of available jobs to be filled quickly.
At least 7.5 million people are projected to lose their pandemic unemployment compensation in the 26 states that are still paying benefits, according to The Century Foundation. That flood of potential new hires comes at a time when job openings are at a record high, and businesses are boosting wages, offering bonuses and providing other incentives to lure workers.
So far, however, employment hasn’t grown substantially faster in the states that terminated benefits early, studies and government data have found.
The enhanced jobless payments aren’t the only reason why Americans may be reluctant to return to work, experts say. Other factors include continued health concerns, trouble finding child care and an increased interest in switching careers. Also, it may take time for the impact of the benefits’ withdrawal to become clear.
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The country got an early look at the effect of ceasing this generous lifeline after roughly two dozen states opted to stop at least one of the federal unemployment benefits programs in June and July. The governors – all Republicans but one – argued that the move would help alleviate the worker shortage that businesses in their states were facing.
“That’s what they were hoping for, but it didn’t happen,” said Peter Ganong, an assistant public policy professor at the University of Chicago who has studied unemployment benefits throughout the pandemic.
Cutting off the benefits had minimal, if any, impact on pushing people back to work, experts said. But it did force the jobless to cut back their spending, which likely hurt local economies.
When the coronavirus pandemic first took hold in the US and upended the economy about 18 months ago, Congress passed an unprecedented expansion of unemployment benefits. It was designed to give people a financial cushion that allowed them to stay home amid state-ordered lock downs that cost millions their jobs.
In late March 2020, lawmakers approved a $600 federal weekly boost to jobless benefits for up to four months, which resulted in about two-thirds of recipients making more on unemployment than they did in wages. Congress revived the supplement in a late December relief package but reduced it to $300 a week. Democrats then extended the boost to early September as part of their $1.9 trillion American Rescue Plan earlier this year.
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Lawmakers also created two other measures to aid the jobless that are set to end later this week. The Pandemic Unemployment Assistance program provides payments for freelancers, the self-employed, independent contractors and certain people affected by the pandemic, while the Pandemic Emergency Unemployment Compensation program extends payments for those who’ve exhausted their regular state benefits.
President Joe Biden said recently that states can use federal relief funds to extend the programs beyond Labor Day, but so far none have said they would do so.
More than 2 million laid-off Americans stopped receiving unemployment benefits and another 1 million-plus people saw their weekly payments shrink by $300 in the states that ended the programs in June.
But only one in eight workers who lost benefits found a job by August 6, said Michael Stepner, an assistant economics professor at the University of Toronto, who recently released a study on the early termination of the benefits.
Stepner worked with a team of researchers from Columbia University, Harvard University and the University of Massachusetts at Amherst. Using data from Earnin, a financial services company, they examined anonymous banking records of more than 18,000 low-income workers who were receiving unemployment benefits in late April.
He expects a similar outcome after payments end nationwide.
“It’s a question of magnitude,” he said. “Will we see a boost in employment? Yes. Will that boost in employment be large? No, it was not large when these initial sets of states withdrew their benefits.”
Another analysis by Jed Kolko, chief economist at job site Indeed, found that while employment grew between May and July in the states that terminated benefits early, it also rebounded in states that continued the payments.
So employers may have to temper their expectations.
“We might not see much of an effect on job growth because we have seen similar job growth since May in both types of states,” said Kolko, who looked at federal data.
Another complication is that many of the people who have been helped by the pandemic programs may face higher hurdles finding new jobs.
For instance, those in the Pandemic Emergency Unemployment Compensation program typically have been out of work for more than six months, and the long-term unemployed often have more trouble landing new positions than those laid off more recently, said Fiona Greig, co-president of the JPMorgan Chase Institute, which has published several studies on unemployment benefits since the start of the pandemic.
Similarly, those enrolled in the Pandemic Unemployment Assistance program tend to be younger, lower income and more marginally attached to the labor force, and therefore may not be able to return to work as quickly, she said.
Businesses having trouble hiring
Still, there are lots of anecdotal reports that people are opting to stay home rather than take jobs. Multiple employers have said they are having a difficult time filling jobs – even if they offer better pay, signing bonuses and other incentives.
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About 16% of people not actively seeking work said the amount of money they are receiving from unemployment benefits and government programs makes it “not worth looking” for work, according to an early June survey from the US Chamber of Commerce, which called for ending the $300 weekly supplement earlier this year.
“Ending the enhanced benefits will be an inducement for some people who have been reluctant to return to the workforce to return,” said Neil Bradley, the chamber’s chief policy officer.
However, other factors are also contributing to the labor shortage, he said. Roughly a quarter of respondents said that Covid-19 concerns, child care and other family needs and a lack of available jobs in sectors that are still suffering were each reasons why unemployed Americans were not looking for work.
“It is next to impossible to in real time isolate one variable,” Bradley said, noting that the continuing spread of the Delta variant may dampen employment growth even after the jobless payments end.
A decrease in spending
While the early termination of benefits may not have had much influence on job growth, it likely had a bigger impact on spending.
The jobless cut their spending by $145 a week, or 20%, after their payments were terminated early, Stepner found.
That has big implications for local economies, which were propped up by the pandemic compensation and other relief measures Congress enacted. The states that ended the programs early gave up $4 billion in federal benefits as of early August, which prompted spending to fall by $2 billion, he said.
“That’s money that would have been flowing to local businesses, who may turn around and hire workers,” Stepner said, noting that earnings only rose by $270 million.