Emergency COVID-19-Era Unemployment Benefits Have Expired

Most studies find cutting benefits early had limited impact on job growth

Roy Maurer By Roy Maurer September 7, 2021
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​Millions of people who were collecting federal emergency unemployment benefits during the pandemic were cut off Sept. 6, as the COVID-19-era policies came to an end.

The expanded unemployment benefits authorized in March 2020 to help mitigate pandemic-induced economic distress included a $300-per-week federal supplement to state jobless payments; additional weeks of assistance for long-term unemployed workers; and a special program to provide benefits to people who traditionally don't qualify for unemployment benefits, such as gig workers and people who are self-employed.

With the expiration, about 7.5 million people collecting the federal aid lost their benefits entirely and another 3 million people using state programs lost the $300 weekly supplement. The Biden administration supports ending the $300 weekly bonus payments as scheduled but is asking states with high unemployment rates to continue paying benefits to long-term unemployed individuals using federal funds previously allocated to states for pandemic relief.  

"With the U.S. economy still short over 5 million jobs, the end of the pandemic unemployment benefits will be an abrupt jolt to millions of Americans who won't find a job in time for this arbitrary end to assistance," said Andrew Stettner, a senior fellow at the Century Foundation, a public-policy think tank in New York City. "In the face of the delta COVID-19 variant, which threatens to keep some workplaces closed, there's a need to extend current benefits and permanently fix the unemployment programs so temporary extensions are not needed."

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Twenty-six states had already moved to end most or all federal benefits in June and July, arguing that the enhanced benefits were exacerbating labor shortages, especially in the hard-hit hospitality and retail sectors, by creating a powerful disincentive to seek work.

"With unemployment checks initially exceeding workers' prior wages for two-thirds of unemployment recipients, businesses have had to compete with the government to get the workers they need to recover," said Rachel Greszler, a research fellow at the Heritage Foundation, a think tank in Washington, D.C.

There is a record-high number of job openings in the U.S., Greszler said, yet the unemployment rate remains high. "Researchers consistently find that more generous unemployment insurance benefits lead to higher unemployment, which hurts workers and leads to a smaller economy," she said.

Greszler said that in addition to possibly keeping some unemployed workers on the sidelines, at least 557 million unemployment checks—amounting to an estimated $357 billion—went to people who were not actually unemployed, due to fraud and abuse of lax eligibility criteria.

The programs "allowed people to claim benefits for a wider range of reasons, such as quitting their job because of COVID-19 or having children affected by school and child care closures," she said. "All these changes required easing eligibility and verification criteria, meaning that instead of employers who participate in the unemployment system having to verify workers' eligibility, individuals could simply self-report information necessary to claim benefits. This effectively allowed criminals to steal personal information and claim unemployment benefits with relative ease."

The FBI, U.S. Department of Labor (DOL) and state unemployment offices reported millions of cases of suspected fraud through the duration of the pandemic-era expanded federal unemployment benefits.  

However, research into how much of an impact the emergency programs played in keeping workers on the sidelines suggests that factors beyond unemployment benefits are playing a larger role in employers' hiring difficulties.

Recently published research conducted by economists for the JPMorgan Chase & Co. Institute found that the extra funds did not significantly hold back the labor market. Other evidence shows that the extra aid only played a limited role in keeping people out of the workforce; this evidence includes an analysis of DOL data which shows that payrolls rose 1.33 percent in July from April in the 25 states that ended the benefits early and 1.37 percent in the other 25 states that did not.

Ultimately, some economists caution that it might be too early to detect the true effect the emergency federal jobless benefits had on job seeking, as differing state and local reopenings and restrictions could be masking the impact of the expiring benefits.

Talent acquisition experts generally agree that the enhanced benefits caused some people to stay on the sidelines, but that several other factors also have played a role in applicant hesitancy, including family care responsibilities, school closures, health and safety concerns, and the ever-present skills gap between open jobs and available workers.

Others say the disruption caused by the pandemic has caused some workers to move on to other industries. "As in other recoveries, the jobs added in the early stages of recovery from the pandemic have been those at the low end, as restaurants and other service-sector businesses reopened and hired workers at low wages and with limited benefits," Stettner said. "The UC Berkeley Food Labor Research Center found that many workers had left the restaurant sector due to concerns about pay and safety during the pandemic. However, better-paid sectors such as information, education, arts and entertainment, and real estate have had more unemployed workers than job openings."

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