Millions of unemployed Americans lost jobless benefits related to the pandemic as of Labor Day – just as rising cases of the coronavirus slowed the pace of hiring.
Overall, an estimated 8.8 million people stopped receiving unemployment insurance as of September 6, 2021. Millions more people will no longer receive the additional US$300 per week that the federal government is providing to supplement state benefits.
But with the pandemic still out there thanks to the rise of the delta version, especially in the southern states, the cessation of these benefits seems at the wrong time. While some claim that the aid is no longer needed and is doing more harm than good, we believe the data tells another story.
Three federal programs designed to support workers hurt by the COVID-19 pandemic and related lockdowns expire on September 6:
All told, the termination of these programs could affect up to 35 million people when you include the families of the unemployed.
Leaving aid didn’t boost job growth
Critics of these federal supplemental benefits claim that they reward Americans for not working by offering more help than they can get from the job. This is why many Republican governors have opted to drop one or more federal programs in recent months.
Idaho Republican Gov. Brad Little said on May 11, 2021, “We see ‘Help Wanted’ signs everywhere. We don’t want people on unemployment. We want people to work.”
But the data we have so far does not support these claims.
We compared employment growth in the 25 states that decided to leave the federal $300 supplement with those that kept it. According to an analysis by the Bureau of Labor Statistics, states keeping the federal supplement increased by 0.77% in July, compared to a 0.54% increase for states, suggesting that benefits are not keeping workers on the edge.
The same pattern holds for the sectors of the economy most affected by COVID-19. Leisure and hospitality jobs, such as waitstaff and cook, accounted for nearly 1 in all jobs lost in 2020. Rents in those industries increased by 2.3% in states that kept federal benefits, compared to 1.55% for other states.
This is in line with a growing number of studies that show no link between high unemployment payments and low job growth during the pandemic.
We won’t know whether this trend continued until the state-by-state employment breakdown in mid-September. But for now, the evidence doesn’t support the claim that the benefits keep people at home.
Unemployed Americans still need support
We know that people who want to work are still being prevented from doing so because of COVID-19.
The latest jobs report, released on September 3, 2021, showed that 5.6 million people were unable to work in August because their employers 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 expected. And there was no profit in leisure and hospitality, which pay the lowest wages of any industry.
As recently as late May, before the launch of the Delta version, pandemic-related unemployment claims were falling in all 50 states. Then, in June and July, claims spiked again as COVID-19 cases surfaced across the country.
About a third of the currently unemployed come from three sectors of the economy: health care and social assistance; accommodation and dining services; and retail business. According to industry salary data, none of these sectors provide an average salary that meets the minimum survival budget of American households.
All of this shows why these three federal programs are still so important.
Extended benefits give unemployed people more time to find jobs while helping cover basic expenses. Gig workers, like Uber drivers and other independent contractors, are in need of unemployment benefits, especially as 60% of them lost income during the pandemic and many continue to struggle as business activity is suppressed. These workers are also less likely to receive employer-sponsored benefits such as health care.
And the $300 federal supplement is important because pre-pandemic state benefits — which are typically about $340 per week — are replaced by only 30% to 50% of lost earnings. Even with the supplement, for most people, it’s still less than the income they earn from their jobs.
tough choice ahead
So the ending benefits mean a lot to low-income families, especially now that the Supreme Court has banned evictions from the Centers for Disease Control and Prevention.
For many people, losing a profit can be the difference between having to pay for food or rent, or skipping a doctor’s visit because of high health care costs.
But after Labor Day benefits end, it will be harder for millions of American families to make ends meet and stay in their homes.
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The author of the BLS data updated the article to provide more details about the analysis and to add background on the structure of the unemployed.