“He kept some food on my table. Decried by some bosses, unemployment benefits have helped Americans overcome the pandemic
âHe kept food on my table. It kept the lights on, âDiaz said of the weekly check-up which, even with a pandemic increase, was well below his usual earnings. “It literally put layers on my son.”
Faced with record job losses due to COVID-19 closures, Congress authorized an unprecedented increase in unemployment benefits last year to respond to the present moment. Lawmakers dramatically expanded the number of people eligible to receive payments and added hundreds of dollars more in additional income to checks each week.
This additional money, which is set to expire in early September, has provided a financial lifeline for tens of millions of Americans in a once-in-a-century pandemic. But it also fueled a fierce backlash from employers and some politicians, whose voices largely dominated the debate around the benefits.
Republicans in Congress have said the generous benefits allow some low-wage workers to earn more on unemployment than on a paycheck, discouraging them from working. After business owners complained about difficulties hiring as the economy reopens this spring, the governors of 26 states – all but one Republican – announced they would remove the extra benefits before they expire to force more people to re-enter the labor market.
“Incentives matter, and the vast expansion of federal unemployment benefits is now doing more harm than good,” said Montana Gov. Greg Gianforte, a Republican, who in May was the first to make the announcement.
A majority of Americans support the governors’ decision, according to a Quinnipiac University poll in May, suggesting that the narrative that benefits have kept people from working has prevailed among the public and raising questions about whether the Congress would accept this kind of generous step into future emergencies.
But research shows that the increase in unemployment benefits does not appear to have significantly dampened hiring in a labor market complicated by lingering fears of the virus and the need to care for children until schools have fully reopened. . And economists largely view the program as a success that has kept Americans spending money during uncertain times, helping to keep the economy afloat.
âIt is far too simplistic to say that unemployment benefits (…) are slowing down the recovery of the labor market. It just wouldn’t be true, âsaid Gregory Daco, chief US economist at Oxford Economics, a global forecasting and analysis company. âThe political decision to cut benefits is a decision which, so far, has been primarily political. There has been very little analysis in terms of net compromise.
Oxford discovered that the weekly $ 600 The four-month increase in unemployment last year brought checks above the median wage for workers in several areas, including education, construction, retailing and restaurants. When the extra money fell to $ 300 last year, the benefits exceeded the median salary of fewer occupations.
But Daco and other economists have said the decision to return to work is much more complex than a simple calculation of whether temporary benefits pay more than his salary.
âPeople don’t compare weekly earnings to [unemployment] benefits, âsaid Nicolas Petrosky-Nadeau, vice president of macroeconomic research at the Federal Reserve Bank of San Francisco. âThey compare long-term work with a continuous stream of weekly income to short-term overtime work. [unemployment] Payment. At the same time, finding a job is not easy, so it is also risky to refuse a job offer.
There is also a broader economic benefit from increasing unemployment benefits.
âDollar for dollar, giving money to unemployed people is surely one of the best ways to stimulate the economy,â said Arindrajit Dube, economist at the University of Massachusetts, Amherst.
Diaz, who returned to work in March, is just one of many workers who said improved unemployment benefits were crucial in getting them through a life-changing pandemic. Some used the benefits to avoid exposure to the virus at in-person jobs, while others trained for new occupations, cared for family members, or stayed home to help children. to follow an online education.
Tyrone White, 45, of Brockton, who worked in customer service for a financial firm, said he turned to unemployment last summer when his employer told him he had to return to work in the office . full time. He refused because two of his children, aged 11 and 7, were at a higher risk if they contracted COVID from severe asthma and allergies. He was worried about passing the virus on to them and also had to stay home as they could not attend school in person.
âI’d rather be at work than stay home collecting unemployment,â White said. The extra $ 300 means he gets more money for unemployment than he had at home when he was working. Without the boost, he said his finances “would have been tight”. Now he is waiting for vaccines to be approved for children under 12 so his children can go to school in person and he can return to work.
Other workers have decided to use the financial cushion of benefits to upgrade their skills and find better paying jobs. It doesn’t help employers who need workers now, but overall it’s a trend that is improving the country’s productivity, experts say.
“It is possible that [unemployment] allows people to look a little longer and try to find better jobs, and in the long run it will be better for the economy, âFederal Reserve Chairman Jerome Powell told lawmakers during a House hearing on Wednesday.
Thomas Conte, 37, of Pittsburgh, is one of them. After being put on leave in March 2020 from his work as a preparatory cook, unemployment allowed him to take online courses in information technology.
âI had a revelation: when will I ever have so much time to maybe improve my career and improve myself? Said ContÃ©. Three months ago, he landed a higher paying job as operational support coordinator for a law firm specializing in debt collection.
âI went from cooking to sitting at a computer, a pretty big change, and I’m pretty happy with it,â Conte said. The plus: he can work from his apartment, where his two dogs keep him company.
Administration officials Powell and Biden dismissed suggestions that rising unemployment has been a major drag on hiring. At Wednesday’s hearing, Republicans pressured Powell on this, citing a Morning Consult poll that showed 13% of unemployed Americans said they had not yet returned to work because of the benefits. . A similar share of unemployed Americans – 14% – cited child care obligations as a reason for staying out of the workforce, while 13% blamed health restrictions.
Another study supports the idea that a small portion of those who receive unemployment insurance do not seek work because of the benefits. Petrosky-Nadeau and his colleague Robert G. Valletta of the San Francisco Fed determined that about 14% of people in early 2021 turned down jobs they would normally have accepted because of the additional $ 300 per week in allowances. unemployment.
The impact has been “noticeable, but relatively small” and concentrated in low-wage sectors, said Petrosky-Nadeau.
âThere wasn’t a single state where the typical worker wouldn’t have an incentive to look for work,â he said.
That hasn’t stopped governors in more than half of the states from announcing that they will end the benefits sooner.
Unemployment Insurance is a joint federal-state program launched during the Great Depression. Most states offer up to 26 weeks of benefits that partially replace regular income, funded by taxes paid by employers. (Massachusetts grants up to 30 weeks.) During past economic downturns, Congress has funded a temporary extension of these deadlines. But it is up to the States to accept them.
According to a March study by the Century Foundation, a progressive think tank, up to 46.2 million people – about 1 in 4 workers – received at least a week of unemployment benefits during the pandemic. About 13.8 million people were receiving some sort of unemployment assistance in the last week of June, according to the Ministry of Labor.
While unemployment benefits were a significant drag on hiring, economists expected job searches to jump in states pulling out of the program. This did not happen, according to the online job site Indeed.
“There is no clear indication that the announcements or the actual removal of benefits resulted in a noticeable and persistent increase in job search activity,” said Nick Bunker, the site’s director of economic research for North America. .
Indeed, it measured activity on its site last month and found that searches had increased from April in half of the states that had ended or announced plans to end the enhanced benefits, while the research activity was down in the other half.
âSome people, even with the impact on their income from the money withdrawn, are willing to wait a little longer because of their concern about the virus,â Bunker said. âIt will take several issues to resolve before we see a sustained increase in interest from job seekers. “
But Aneta Markowska, chief financial economist at investment bank Jefferies, found that in states where the $ 300 is already benefiting expired, more people have returned to the workforce. She looked at the state’s weekly jobless claims and found that they declined by an average of 5.2 percent in the first week after the enhanced payments expired, 13.7 percent in the second week, and 10 percent. 8% the third week.
âLooks like people really waited until these benefits were completely over before they went back to work. It certainly gives some validity to the idea that these perks have limited hiring to some extent, âshe said. âI certainly wouldn’t say it’s the dominant factor or the only factor. I actually think the dominant factor is caregiving and some health risks. “
For Diaz, the $ 300 federal boost that began at the end of December allowed him to survive a child care crisis that has helped drive millions of women out of the workforce. She was able to return to work in March when her sister moved in to babysit, but she said she still owed about $ 18,000 in rent for her two-bedroom apartment because of her absence from work.
âPeople talk about it like people who empty themselves from the system. It’s not like that, âDiaz said of rising unemployment. âNo one gets rich with the $ 300. “