Pandemic hardship is about to get a lot worse for millions of out-of-work Americans

The door to unemployment benefits is closing for millions of Americans. AP Photo/John Minchillo

In all, an estimated 8.8 million people will stop receiving unemployment insurance beginning on 2021 Sep 06. Millions more will no longer get the extra US$300 a week the federal government has been providing to supplement state benefits.

But with the pandemic still raging thanks to the rise of the delta variant, particularly in Southern states, the expiration of these benefits seems ill-timed. While some claim that the aid is no longer needed and doing more harm than good, we believe that the data tell another story.

Benefits lost

Three federal programs created to support workers hurt by the COVID-19 pandemic and related lockdowns expire on Sept. 6:

All told, the end of these programs may affect 35 million people when you include families of the unemployed.

Dropping aid didn’t boost jobs growth

Critics of these federal supplemental benefits claim they reward Americans for not working by offering more in aid than they’d get from a job. This is why many Republican governors opted to drop out of one or more of the federal programs in recent months.

“We see ‘Help Wanted’ signs everywhere,” Idaho Republican Gov. Brad Little said on 2021 May 11. “We do not want people on unemployment. We want people working.”

But the data we have so far simply doesn’t back up these claims.

We compared employment growth in the 25 states that decided to drop the federal $300 supplement with those that kept it. Total employment in states that kept the federal supplement grew by 0.77% in July, compared with 0.54% for the states that gave it up, according to an analysis of Bureau of Labor Statistics, suggesting the benefits aren’t keeping workers on the sidelines.

The same pattern holds for sectors of the economy hit hardest by COVID-19. Leisure and hospitality jobs, such as waitstaff and cooks, accounted for roughly 1 in 4 of all jobs lost in 2020. Hiring rose 2.3% in those industries in states that kept the federal benefit, compared with 1.55% for other states.

This is consistent with a growing number of studies that show no correlation between the higher unemployment payments during the pandemic and lagging job growth.

We won’t know whether the trend continued until the state-by-state employment breakdown is released in mid-September. But for now, the evidence doesn’t support the claim that benefits keep folks at home.

Jobless Americans still need support

We do know that people who want to work are still being prevented from doing so because of COVID-19.

The latest jobs report, released on 2021 Sep 03, showed that 5.6 million people were unable to work in August because their employer closed or lost business because of the pandemic, up from 5.2 million in July.

That may help explain why companies hired only 235,000 in August – a third of what economists had expected. And there were no gains in leisure and hospitality, which pay some of the lowest wages of any industry.

As recently as late May, before the delta variant began causing caseloads to climb, pandemic-related unemployment claims were falling across all 50 states. Then, over June and July, claims spiked again as COVID-19 cases rippled across the country.

Nearly a third of those currently unemployed come from three sectors of the economy: health care and social assistance; accommodation and food services; and retail trade. According to industry wage data, none of these sectors provides a median wage that meets the minimum survival budgets of American households.

All this shows why these three federal programs are still so important.

The extended benefits give unemployed people more time to find a job while helping them cover basic expenses. Gig workers, like Uber drivers and other independent contractors, need unemployment benefits too, especially as 60% of them lost income during the pandemic and many continue to struggle as business activity remains subdued. These workers are also less likely to receive employer-sponsored benefits like health care.

And the $300 federal supplement is important because pre-pandemic state benefits – which are typically about $340 a weekreplaced only 30% to 50% of lost earnings. Even with the supplement, for most people, it’s still less than what they were earning from their job.

Tough choices ahead

That’s why the expiring benefits mean so much to lower-income families, especially now that the Supreme Court has struck down the Centers for Disease Control and Prevention’s ban on evictions.

For many, losing the benefit could be the difference between choosing to pay for food or rent, or forgoing a doctor’s visit because of the high costs of health care.

But after the benefits expire on Labor Day, making ends meet and staying in their homes will be significantly harder for millions of American families.

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Article updated to provide more detail about author analysis of BLS data and add background on composition of the unemployed.

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.


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