Millions of people will lose their unemployment benefits this weekend, as federal pandemic-era policies come to an end.
In March 2020, Congress authorized a historic expansion of the country’s safety net for unemployed people in order to deal with the fallout from the Covid-fueled economic downturn.
Lawmakers extended those temporary extensions twice, increasing the number of people eligible for unemployment benefits and increasing the amount of weekly aid recipients received.
If Congress does not act, the aid will expire on Saturday or Sunday, depending on state administrative rules. Given recent improvements in the economy and labor market, lawmakers appear unlikely to extend the policies for a third time.
According to The Century Foundation, a progressive think tank, if this happens, approximately 8.8 million Americans will lose their benefits entirely.
According to the group, another 3 million people will have their aid cut by $300 per week. According to Labor Department data, the average person would receive about $321 per week without the supplement, or about 38% of their pre-layoff wage.
“We’re cutting benefits when many, many people still rely on them,” says Till von Wachter, an economics professor at the University of California, Los Angeles, and director of the California Policy Lab.
“This is a recurring issue in American recessions. We ask politicians to devise benefit programs, and they set end and beginning dates “He continued. “They’re predetermined and have nothing to do with the state of 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 added per month over the last three months, as well as a 5.4 percent unemployment rate in the United States, as evidence of a recovering economy.
However, the Biden administration urged states with high unemployment rates to extend benefits to certain groups beyond this weekend’s deadline, using federal funds allocated to states through the American Rescue Plan. Among these groups are the long-term unemployed and workers such as independent contractors who do not qualify for traditional state assistance.
However, it is unclear whether states will do so. According to a spokeswoman, the US Department of Labor isn’t tracking those decisions because the use of the funds isn’t under its jurisdiction.
Already, 26 states have moved to end most or all federal benefits in June or July, before the official Labor Day deadline.
Except for Louisiana’s governor, all of their governors, all Republicans, said increased benefits were discouraging people from looking for work and stifling the economy’s recovery by exacerbating labor shortages.
More generous benefits have also increased the frequency with which criminals target the unemployment system. “Between massive fraud and worker shortages, expanded unemployment insurance benefits have arguably been the federal government’s most flawed – and damaging – economic policy enacted in response to Covid-19,” Rachel Greszler, a research fellow at the right-leaning Heritage Foundation, wrote in July.
However, evidence suggests that benefits haven’t played a significant role in hiring challenges.
According to a recent study, 7 out of every 8 jobless people receiving benefits in states that cut federal benefits in June had not found work by early August. According to the study, withdrawing benefits did not result in a significant increase in employment and caused households to cut $2 billion in spending from the local economy.
Spending cuts may have a negative impact on jobs if consumers cut back on dining out and other activities to save money.
According to Betsey Stevenson, a professor of public policy and economics at the University of Michigan, policymakers must consider these net employment effects when making policy decisions. When it comes to unemployment benefits, the question is whether the loss of household income or the job-disincentive effect of increased benefits is more important. “People need the money more than we need to get the incentives right [right now],” Stevenson said, citing available research.
According to economists, factors other than unemployment benefits are likely playing a larger role in employers’ difficulty finding workers.
Covid health risks, for example, are still present, exacerbated by the highly contagious delta variant, and childcare-related roadblocks haven’t completely receded.