A new study has revealed that Republican-run states prematurely ending unemployment benefits last year did not have a significant impact on getting people back to work, as GOP lawmakers claimed it would — but it did result in financial hardship for millions of Americans.
In the summer of 2021, as many areas of the country were dealing with a supposed “worker shortage,” several Republican-led states’ governors decided to end extended federal unemployment benefits that included weekly increases to the typical insurance payment. The move affected some 4.1 million unemployed workers in the 25 states that ended the program, which had been initiated in response to the economic downturn brought on by the coronavirus pandemic.
Republican governors justified ending the benefits by arguing that the additional unemployment benefits disincentivized workers from returning to their jobs. In reality, the so-called “worker shortages” were likely due to workers wanting to return to jobs that provided better pay and benefits than many employers were willing to give.
The move to prematurely end the extended unemployment benefits seemed to have had little, if any, effect on getting people back to work, according to a paper published last week by the Federal Reserve Bank of San Francisco. In states that ended the unemployment benefits, hiring did pick up at a faster pace, on average — but the rate difference, when compared to states that didn’t end extended unemployment benefits, is incredibly miniscule.
The states that ended the benefit early only saw a hiring rate difference of 0.2 percent compared to other states, the study found — a difference that is “pretty much imperceptible,” said Robert Valletta, associate director of research at the Federal Reserve Bank of San Francisco and co-author of the paper.
Put another way, for every 1,000 people that were hired in states that kept the unemployment benefits in place, 1,002 people were hired in states that removed the benefits — hardly the significant change that GOP lawmakers promised would come from ending the benefits.
At the same time, Valletta added, a “meaningful fraction of people suffered real hardship as a result” of the cuts. Among the millions of Americans who saw their unemployment insurance curtailed, the average worker lost around $6,000 in benefits compared to workers in states that kept them intact.
Progressive lawmakers, including Sen. Bernie Sanders (I-Vermont), largely rejected conservatives’ claims that unemployment insurance benefits were hurting businesses seeking workers. Even if that was the case, Sanders said, it wouldn’t justify ending the extended benefits.
If such benefits were “preventing employers from hiring low-wage workers there’s a simple solution,” Sanders said in the spring of 2021. “Raise your wages. Pay decent benefits.”