Millions of unemployed Americans are set to lose pandemic-related jobless benefits after Labor Day – just as surging cases of coronavirus slow the pace of hiring.
In all, an estimated 8.8 million people will stop receiving unemployment insurance beginning on Sept. 6, 2021. Millions more will no longer get the extra US$300 a week the federal government has been providing to supplement state benefits.
But with the pandemic still raging thanks to the rise of the delta variant, particularly in Southern states, the expiration of these benefits seems ill-timed. While some claim that the aid is no longer needed and doing more harm than good, we believe that the data tell another story.
Three federal programs created to support workers hurt by the COVID-19 pandemic and related lockdowns expire on Sept. 6:
- The Pandemic Extended Unemployment Compensation program offers 13 additional weeks in state unemployment benefits. An estimated 3.3 million people who were getting benefits through this program are set to lose them.
- Pandemic Unemployment Assistance provides aid to gig workers and others not normally eligible for unemployment benefits. About 5.5 million people were receiving aid because of this program including those who just joined the rolls in the second half of August.
- The Federal Pandemic Unemployment Compensation program supplements state benefits with an additional $300 in aid per week down from $600 when it began in April 2020.
All told, the end of these programs may affect 35 million people when you include families of the unemployed.
Dropping aid didn’t boost jobs growth
Critics of these federal supplemental benefits claim they reward Americans for not working by offering more in aid than they’d get from a job. This is why many Republican governors opted to drop out of one or more of the federal programs in recent months.
“We see ‘Help Wanted’ signs everywhere,” Idaho Republican Gov. Brad Little said on May 11, 2021. “We do not want people on unemployment. We want people working.”
But the data we have so far simply doesn’t back up these claims.
We compared employment growth in the 25 states that decided to drop the federal $300 supplement with those that kept it. Total employment in states that kept the federal supplement grew by 0.77% in July, compared with 0.54% for the states that gave it up, according to an analysis of Bureau of Labor Statistics, suggesting the benefits aren’t keeping workers on the sidelines.
The same pattern holds for sectors of the economy hit hardest by COVID-19. Leisure and hospitality jobs, such as waitstaff and cooks, accounted for roughly 1 in 4 of all jobs lost in 2020. Hiring rose 2.3% in those industries in states that kept the federal benefit, compared with 1.55% for other states.
We won’t know whether the trend continued until the state-by-state employment breakdown is released in mid-September. But for now, the evidence doesn’t support the claim that benefits keep folks at home.
Jobless Americans still need support
We do know that people who want to work are still being prevented from doing so because of COVID-19.
The latest jobs report, released on Sept. 3, 2021, showed that 5.6 million people were unable to work in August because their employer 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 had expected. And there were no gains in leisure and hospitality, which pay some of the lowest wages of any industry.
As recently as late May, before the delta variant began causing caseloads to climb, pandemic-related unemployment claims were falling across all 50 states. Then, over June and July, claims spiked again as COVID-19 cases rippled across the country.
Nearly a third of those currently unemployed come from three sectors of the economy: health care and social assistance; accommodation and food services; and retail trade. According to industry wage data, none of these sectors provides a median wage that meets the minimum survival budgets of American households.
All this shows why these three federal programs are still so important.
The extended benefits give unemployed people more time to find a job while helping them cover basic expenses. Gig workers, like Uber drivers and other independent contractors, need unemployment benefits too, especially as 60% of them lost income during the pandemic and many continue to struggle as business activity remains subdued. These workers are also less likely to receive employer-sponsored benefits like health care.
And the $300 federal supplement is important because pre-pandemic state benefits which are typically about $340 a week replaced only 30% to 50% of lost earnings. Even with the supplement, for most people, it’s still less than what they were earning from their job.
Tough choices ahead
That’s why the expiring benefits mean so much to lower-income families, especially now that the Supreme Court has struck down the Centers for Disease Control and Prevention’s ban on evictions.
But after the benefits expire on Labor Day, making ends meet and staying in their homes will be significantly harder for millions of American families.
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Article updated to provide more detail about author analysis of BLS data and add background on composition of the unemployed.