Millions of Americans now receiving pandemic aid will see their benefits end in September.
There is no shortage of politicians, business executives and economists who say this is good, claiming that unbound cash has served as a disincentive to work. The number of job offers nationwide, which rose to 10.1 million at the end of June, would seem to support this point.
But is this conventional wisdom wrong? Based on preliminary data from more than two dozen states, which have already cut an extra $ 300 in weekly unemployment benefits to about 3.5 million Americans, it may be.
Dr. Arindrajit Dube, a professor of economics at the University of Massachusetts at Amherst, has analyzed what has happened in these states. He notes that half of all U.S. states have completed all or most of the pandemic unemployment insurance (UI) programs, the vast majority in June. They have all stopped weekly payments of $ 300, called PAND for unemployment compensation. Twenty-one in 25 have completed pandemic emergency unemployment compensation (PEUC), which extends benefits beyond the 26 weeks offered by most states.
An unexpected finding
What happened next?
Since millions of jobs are not being filled, those who cut quickly would not find work? Dube’s investigation points to a different, albeit preliminary, judgment. Analyzing a key data point: the weekly employment ratio to the population (EPOP) in relation to the expiration of benefits, he writes that “between early June and early July, EPOP rates in the states that go see large declines (unemployment payments) did not experience any increase in employment. ”
In fact, the ratio decreased by 1.4 percentage points over the same period, while it increased by 0.2 percentage points in states that did not end pandemic payments.
In short, the benefits have been cut, but Dube says that “it does not seem to have resulted in most of these people having a job during the first 2-3 weeks after the expiration.”
To be fair, it is early, as the professor writes, and that “more data is needed to make a more complete picture.” We will get more data next week, when the Department of Labor issues its state employment and unemployment for July.
Different forces at work
What’s going on here?
“Early indications are that (unemployment) benefits have had some effect on job search,” says Julia Pollak, chief economist at Ziprecruiter, based in Santa Monica, California, “but it’s likely that the effect be pretty small because there are other things that keep people out of the workforce. ”
She cites the obvious reason: the pandemic, which is re-emerging in much of the country, and childcare, which has caused many workers – mostly women – to stop working. Dallas Federal Reserve Bank data puts the figure at 1.3 million.
There are other data. The Dallas Fed says 31% of workers are reluctant, for any reason, to return to their previous job. It is a data point that has grown slowly but steadily for over a year.
Beyond that, there are actually some good reasons for people to take their time back at work. Many Americans, despite the pandemic, feel reddened. In case you forgot, the pandemic came at the end of a long expansion of the stock market and, after the short bear market of February-March 2020, prices recovered completely and then some. Meanwhile, house prices have risen across the country, allowing millions to refinance at lower rates and withdraw cash. Savings have also increased.
“The country suffered unprecedented savings,” says the Federal Reserve Bank of Kansas City.
In addition, there are all the cash (trillions) dropped on Americans by the Trump and Biden administrations.
The unemployed are taking their time
A rising tide doesn’t lift all ships, but it has raised enough, Pollak says, to give many Americans the feeling they don’t have to jump on the first job offer that comes their way.
“We ask active job seekers: Do you feel financial pressure when looking for work? And only a third feel compelled to make the first offer they receive, “he says.” People have more time. This is a challenge for employers. ”
Therefore, jobs are not being filed because people receive a meager $ 300 a week from the government. They are not filled because people are not financially obliged to return to work, especially when it comes to travel.
There is a broader observation that needs to be made about working to work, strive, achieve, and demonstrate in the marketplace, regardless of the financial position you are in. But this is a debate for another day.
And I don’t want to crush that. There is no doubt that millions of Americans are fighting and for whom $ 300 a week is a big problem. But there is also a lot of data suggesting that many others are eliminating the pandemic in good shape.
There is no single policy to suit everyone. If times are loose for millions, surely we can find a way to continue helping those who are not so lucky.