Help may be wanted. But jobless aid is still needed. Photo: Frederic J. Brown/AFP via Getty Images This year, America is celebrating Labor Day by throwing millions of workers off unemployment benefits amid a raging pandemic.
Who will lose jobless benefits or $300 bonus checks after Labor Day? In response to the COVID recession, the federal government made unemployment benefits more generous, longer lasting, and more widely accessible. It did this primarily through three major programs: When these programs end on Labor Day, the long-term unemployed and PUA recipients will lose all jobless benefits. According to an estimate from the Century Foundation, about 7.5 million U.S. workers fall into those two categories. Meanwhile, roughly 3 million other workers are poised to retain unemployment benefits after Labor Day, but at a much lower rate as their FPUC bonuses will expire. All this makes next week’s benefits cliff much steeper than any in modern memory.
Red states barely needed an economic rationale for cutting welfare benefits. But the notion that Congress had accidentally engineered a labor shortage had some buy-in with Democratic economists too, which is one reason why the Biden administration is not pushing to extend the COVID-era UI programs past Labor Day . And yet available evidence suggests that enhanced unemployment benefits have had little impact on the labor market.
A separate analysis from The Wall Street Journal yielded a similar finding: Between April and July, payrolls expanded by 1.33 percent in benefit-cutting states and 1.37 percent in benefits-maintaining ones. This summer, states that maintained federal UI benefits saw workers transition from being “not in the labor force” to “employed” at a much higher rate than other states did. As the following chart from Dube illustrates, this divergence between UI and non-UI states began in June 2021, right when the latter started cutting benefits.
As this group’s income fell, so did its consumer spending. On average, their expenditures declined by $145 a week. This represents a significant drop in demand for goods and services — and thus for workers. Which is to say: If cutting UI marginally increased the propensity of beneficiaries to find jobs, it also likely made jobs a bit harder to find.
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