Americans without jobs in at least 18 states are about to wake up abruptly

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Some state lawmakers are halting increases in federal unemployment benefits.

Since the start of the pandemic, each state has accepted federal unemployment assistance which has enabled it to distribute benefits to unemployed people who would not normally be entitled to it. States also distributed additional federal benefits – including an additional $ 600 per week at one point – to all unemployed workers in addition to their state benefits.

These improved unemployment benefits were due to expire in September, but a growing number of states want to end them sooner, in part because of growing complaints from employers who cannot fill vacancies because they claim benefits Overly generous federal unemployment rates maintain potentials. home workers.

Some 18 states are withdrawing from federal unemployment benefit programs. States, which all have Republican governors, include Alaska, Alabama, Arizona, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Dakota North, Ohio, South Carolina, South Dakota, Tennessee, Utah, West Virginia, and Wyoming.

“We have flooded the area with checks that everyone loves, I’m sure, and also increased unemployment,” Senate Minority Leader Mitch McConnell said last week.

Ending federal unemployment benefit programs, which were originally enacted under the CARES Act in April 2020 when some 23 million Americans were out of work, will encourage more Americans to seek employment opportunities , say some economists and decision-makers.


More than 4 million Americans do not work because they are afraid of contracting the coronavirus


– US Census Bureau Household Pulse Survey

President Joe Biden recognized that “some employers are struggling to fill jobs,” when he spoke about the jobs report last week. But when asked if improved unemployment benefits prevented some workers from returning to work, he replied: “No, nothing measurable.”

Employers in these 18 states won’t have to raise wages to compete with unemployment benefits which in some cases exceed their state’s minimum wage.

Last month, the United States created some 266,000 jobs – well below the one million jobs economists predicted. In the meantime, there is over 8 million job vacancies in the United States, according to the Ministry of Labor’s survey of job openings and turnover. But the first jobless claims have dropped to a pandemic low of 473,000 last week, the DOL reported on Thursday.

When federal benefits were cut from $ 600 to $ 300, total spending in 15 Illinois counties fell 5%

But some research suggests that cutting federal unemployment benefits can also have a big unintended consequence – people could become more frugal with their money.

After federal unemployment benefits were cut in half from $ 600 to $ 300, the total level of consumer spending in 15 Illinois counties fell 5%, according to an article titled “The effect of fiscal stimulus: evidence of COVID-19” which was released by the National Bureau of Economic Research in August.

The authors of the article – who are professors at the University of Pennsylvania, University of Chicago, Illinois State University, New York University and University of Ohio State – posted a revised version of the story two months ago.

The researchers compared the wages of workers before the pandemic to what they received in unemployment benefits during the pandemic using data provided by the Illinois unemployment insurance system. They used aggregate data from several private companies to estimate debit and credit card spending.


After federal unemployment benefits were cut in half from $ 600 to $ 300, total spending levels in 15 Illinois counties fell 5%

If individual spending levels were to drop 5% due to the reduction in benefits to $ 300 per week, it would hardly make the headlines, said Julia Lane, professor at NYU’s Wagner Graduate School of Public Service and author. of the study.

But a 5% drop in total spending at the county level is “pretty high,” she said.

Consumer spending is the lifeblood of the economy, accounting for around 70% of all gross domestic product of the United States. If consumer spending fell 5% nationally, that would mean a “massive” drop in GDP, Lane told MarketWatch.

Total consumer spending would likely decline by a smaller percentage in all counties across the United States once the additional $ 300 unemployment benefit expires for every American unemployed in September, Lane said. This is because many more people were unemployed when the study was conducted than they are now.

Effectively, governors who cut unemployed Americans off federal unemployment benefits are taking billions of dollars out of the U.S. economy, said William Spriggs, chief economist of the AFL-CIO, a federation of unions that represents more than 12 million. of workers, in a Tweeter
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Thursday.


Consumer spending is the lifeblood of the economy, accounting for about 70% of all gross domestic product in the United States

But “in addition to losing the vital purchasing power of workers in their local and state economies, they are also pushed further into poverty by losing the ability to support their families, secure housing, food and more, ”said Alexa Tapia, an expert. in unemployment benefits to the National Employment Law Project, a workers’ rights organization.

Of all government spending programs, unemployment benefits have one of the biggest “bang for the buck”

For every dollar spent on unemployment insurance, there is a multiplier effect leading to a 1.64 increase in GDP, according to a 2008 study published by Mark Zandi, chief economist at Moody’s Analytics.

Meanwhile, for every dollar spent on infrastructure projects like President Joe Biden’s $ 2.3 trillion U.S. jobs plan, U.S. GDP could grow by a multiple of 1.59.


For every dollar spent on unemployment insurance, there is a multiplier effect leading to a 1.64 increase in GDP

Without the additional $ 300 per week, unemployed Americans in Alabama, Arizona, Arkansas, Georgia, Mississippi, Missouri, South Carolina and Tennessee, where weekly benefits average benefits are less than $ 300, will see their total benefits cut by more than half.

Concert workers, independent contractors, and self-employed workers in all 18 states could stop receiving unemployment benefits altogether.


“States that do this will be disappointed”


– Stephen Wandner, Principal Investigator at the National Academy of Social Insurance

These workers “will be desperate to keep body and soul together,” said Stephen Wandner, senior researcher at the National Academy of Social Insurance. “There will be a change in behavior,” he added, predicting that more people will apply for jobs once they are cut from unemployment benefits.

“We don’t know how much of a change there will be,” said Wandner, a former US Department of Labor actuary, adding that “states that do will be disappointed” because it won’t spur as many people as they would probably like to return to work.

More than 4 million Americans are not working because they are afraid of contracting coronavirus, according to The data from the latest Household Pulse Survey from the US Census Bureau which was released on April 7. 8 million more people said they could not work because they were caring for a child or an elderly person.


Unemployed Americans in Alabama, Arkansas, Mississippi, Missouri and Tennessee, where state average weekly benefits are less than $ 300, will receive less than half of what they previously received .

But some business leaders say improved unemployment benefits prevent people from applying for jobs.

For example, in Mississippi, the state with the lowest cost of living, where the maximum weekly unemployment benefit is $ 235, the additional $ 300 per week in federal benefits “is significant,” said Douglas Holmes, president of UWC Strategic Services on Unemployment & Workers’ Compensation, a professional group representing the business community on unemployment insurance issues. .

In fact, it’s such a large amount for Mississippians that it will likely have an impact on “their willingness to return to work due to concerns about COVID” after June 12, when Mississippians no longer receive federal benefits. under an ordinance of the republican government of the state. Tate Reeves signed earlier this week, Holmes told MarketWatch.

“There are certain circumstances where the extra $ 300 a week might be the thing a rational person looks at and says, ‘I’m not going to take this job because I can earn enough unemployed to wait for the next best job, ‘”said Holmes.

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