Republican governors of 24 states – including Florida and Nebraska this week – have indicated they will withdraw from federal unemployment insurance (UI) programs created at the start of the pandemic. Some states end participation in all federal unemployment insurance programs in the event of a pandemic, others only in some of the federal supports. These actions are dangerously short-sighted.
The UI provides a lifeline for workers unable to find suitable employment, giving them time to find work that matches their skills and paying a living wage. In addition, the money provided by these fully funded by the federal government The programs strengthen consumer demand and business activity in local economies, helping to accelerate the recovery. In many states, these federal unemployment insurance programs provide the bulk of all unemployment benefits to unemployed workers. By removing these programs – which currently provide an additional $ 300 in weekly benefits, allow workers who have exhausted traditional UI to continue receiving benefits and expand eligibility to workers typically not included in UI programs. existing unemployment insurance – governors weaken the potential economic growth of their states. .
In addition, the most recent national data on employment and unemployment shows that the country has yet to recover from the COVID-19 recession. In April, the country was still down 8.2 million jobs from before the pandemic, and 9 to 11 million jobs since then when you factor in jobs the economy should have added. to track the growth of the working-age population over the period. last year.
With an official unemployment rate of 6.1%, nearly 10 million people are actively looking for work and fail to find it. These estimates underestimate the real level of weakness in the labor market, as many people have left the workforce since the start of the COVID-19 shock, but would likely return to jobs if jobs were available, and others are waiting. always to be recalled after “temporary” layoffs. The country is simply not yet at the point where states should cut aid to the unemployed.
April state employment and unemployment data released last Friday shows that in many states that are cutting their unemployment programs, labor market conditions are not much stronger than the national situation. Figure A shows which states have indicated they will reduce support for unemployed workers. In four of those states, the unemployment rate in April was above the national average: Arizona (6.7%), Alaska (6.7%), Texas (6.7%) and Mississippi (6.2%) . In four other states, the official unemployment rate was still 5% or more: West Virginia (5.8%), Wyoming (5.4%), South Carolina (5.0%) and Tennessee (5, 0%).
However, these estimates probably underestimate the true weakness of the labor markets in these states. In seven of the eight states mentioned above, and in 20 of the 24 states that have cut unemployment insurance, labor force participation has fallen since before the pandemic – in some cases, dramatically. The participation rate fell an average of 1.1 percentage points among states that cut unemployment insurance, with declines of up to 3.8% in Iowa, 2.1% in Montana, 2.0% in Florida, 1.9% in Nebraska and 1.8% in Texas. . Some of these declines may be attributable to unemployed workers opting for early retirement, but it is likely that most have given up looking for work due to few suitable options, valid concerns about risks to life. health or the need to provide care to a child or family member.
Almost all of the states that are reducing UI still have far fewer jobs than before the pandemic. Employment has fallen 3.5% on average since February 2020 in these states. When taking into account the jobs these states would need to keep up with the growth of the working-age population, employment is on average 4.8% lower than one would expect if it weren’t for no recession.1 Data for each state are available. in Figure B. In states that are reducing unemployment insurance, the jobs deficit – the difference between the current level of employment in the state and the level we would expect if job growth had kept pace with the population growth since February 2020 – ranges from a low of 12,000 jobs in South Dakota (or 2.8% of employment as of April 2021) to 678,000 jobs in Texas (or 5.4% of employment in South Dakota). ‘April 2021).
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The most recent decisions by Texas and Florida to cut unemployment benefits are particularly egregious. Texas’s unemployment rate is still three percentage points above its pre-pandemic unemployment rate. The state has nearly a million officially unemployed people – people actively seeking work, but unable to find work. Florida’s unemployment rate is 1.5 percentage points above its pre-pandemic rate, with nearly half a million people officially unemployed. Since February 2020, 150,000 people have left the workforce in Texas and nearly 220,000 have exited in Florida.
Claims that federal unemployment insurance programs prevent businesses from finding staff are not supported by the evidence. Several empirical studies have shown that increasing unemployment benefits did not significantly slow employment growth. In fact, the sectors where generous unemployment insurance benefits would be most likely to encourage workers out of the labor force would be the low-wage sectors, such as recreation and hospitality. Again, it is the sector that has experienced the fastest growth in April. The central problem remains the lack of sufficient jobs for all those who are unemployed.
There may be areas where some employers find it difficult to fill positions, but the likely obstacle is not overly generous UI benefits – rather it is the wage offers that are too low to make those jobs. attractive. As my colleagues Heidi Shierholz and Josh Bivens note:
“Many face-to-face jobs in the service sector have unambiguously become worse workplaces over the past year. This has by no means been fully restored to pre-COVID normal, as the coronavirus remains far from completely removed. Well-functioning labor markets should take account of this degraded quality of jobs by offering higher wages to encourage workers to return. If improved unemployment insurance benefits and an increasing dose of fiscal stimulus make it possible to quickly deliver these higher wages in the face of supply constraints, then it appears that they improve the efficiency of the labor market in the future. this regard.“
In other words, if some workers choose to pass on low-paying, potentially dangerous, or otherwise undesirable jobs while looking for something better suited to their skills or circumstances, this is a positive and economic feature of a system. strong unemployment insurance.
As the threat of the pandemic subsides and businesses return to regular operations, more workers are returning to work and fewer and fewer will have to rely on unemployment programs. Across all states, the volume of weekly unemployment claims filed has declined significantly from the highs recorded earlier this year. On average, the total number of initial claims for both regular unemployment insurance and pandemic unemployment assistance (PUA) has fallen by 30% and 38%, respectively, since the start of February2. Continuing demands for both programs have similarly declined.
But those who still depend on these programs are probably those who need them the most – the people who have the most difficulty finding suitable employment or who face significant constraints on their ability to return to work due to their shortcomings. responsibilities for care, health problems or other factors. Cutting off adequate supports to these workers to try and force them into any available job – even if it is poorly paid, high risk, unsuitable for their skills, or incompatible with their responsibilities at home – is cruel and not in the long-term best interests of the workers or businesses of any state.