By: Juliana Kaplan.
- After dismal jobs numbers in the spring, about half of states in the US ended federal unemployment early.
- But research has continually shown that ending benefits had little effect on states’ employment.
- However, it did cause a big dip in spending — and unemployment is associated with cutting down food insecurity.
Americans who’ve already lost unemployment benefits aren’t going back to work in droves — instead they are spending less and may not be getting enough to eat.
Federal unemployment benefits have become one flashpoint in the debate over pandemic economic recovery. When the spring’s jobs number showed that people weren’t flocking back to the workforce as quickly as expected, 25 GOP governors (and one Democratic governor) pointed to enhanced benefits as a deterrent — and opted to cut off most, or all, of them completely ahead of the September expiration.
However, there’s one thing that increasingly hasn’t happened. Research has continually found that cutting off the benefits early had little difference on job growth and employment. The latest analysis comes from the Wall Street Journal, which found that there was “roughly similar job growth” in states that did and did not opt out of benefits.
Economist Peter Ganong, who co-authored a paper that found the disincentive effect of benefits was small, told the Journal: “If the question is, ‘Is UI the key thing that’s holding back the labor market recovery?’ The answer is no, definitely not, based on the available data.”
That aligns with other early research on the impact of benefits ending. CNBC reports that analyses from payroll firms UKG and Homebase both found that employment didn’t go up in the states cutting off the benefits; in fact, that Homebase analysis found that employment declined in the states opting out of federal benefits, while it went up in states that chose to retain benefits. In June, Indeed’s Hiring Lab found that job searches in states ending benefits were below April’s baseline.
In July, Arindrajit Dube, an economics professor at University of Massachusetts Amherst, found that ending benefits didn’t make workers rush back.
“Even as there was a clear reduction in the number of people who were receiving unemployment benefits — and a clear increase in the number of people who said that they were having difficulty paying their bills — that didn’t seem to translate, at least in the short run, into an uptick in overall employment rates,” Dube told Insider at the time.
But the impact on people and economies is very real
In August, Dube — along with researchers from Harvard University, Columbia University, and University of Toronto — released a new paper looking at 19 states who withdrew benefits early. They found that ending benefits had a small impact on employment in those states: “For every 8 workers who lost their benefits, 1 worker found a new job.”
But the bigger hit came to spending and states’ economies. The researchers found that consumer spending in those states dropped by $2 billion — “for every $1 of reduced benefits, spending fell by 52 cents.”
A January paper from Julia Raifman, Jacob Bor, and Atheendar Venkataramani looked at the link between unemployment insurance and food insecurity. They concluded that UI “was associated with a 35% reduction in reporting any food insecurity and a 48% decline in eating less due to financial constraints.”
Now, an estimated 7.5 million Americans are set to lose all of their federal benefits in a matter of days, according to an analysis from the left-leaning Century Foundation. Dube’s research extrapolates that that could lead to $8 billion less in spending in September and October. It could also lead to a reversal in those food insecurity trends.
Originally posted in Business Insider: https://basicincometoday.com/?p=11593&preview=true&_thumbnail_id=11594