Expanded unemployment benefits kept millions of Americans from returning to work even as employers were desperate to hire workers, accordi...
Expanded unemployment benefits kept millions of Americans from returning to work even as employers were desperate to hire workers, according to a new study.
The onset of the COVID-19 pandemic in 2020 was greeted with lockdowns and business closures. The new study, by the Texas Public Policy Foundation this month, notes that increased unemployment benefits were approved early in the pandemic, and again in 2021 as the economy began to slowly revive.
The study notes that the 2021 extensions proved particularly problematic, because the higher payments ended in September, keeping many people out of the labor market in the summer of 2021, when employers were desperate to hire workers.
“The effect was to incentivize people not to work, resulting in increased unemployment, greatly hampering the labor market by contributing to an artificial shortage of labor,” the report said.
Noting that some states, mostly led by Republicans, ended the extra payments before the scheduled end of the extra cash, the report said there is a clear difference between the states that ended the payments and those that did not.
“Those states that ended the program early experienced substantially faster job growth in terms of how quickly they approached pre-pandemic employment levels,” the report said.
The report’s bottom line was that whatever its motives, the public policy experiment should not be repeated.
“Regardless of the positive effects the supplemental unemployment benefits may or may not have provided, the program had a detrimental effect on the labor market,” the study said.
“Those states that concluded their participation in the program early experienced less of this effect. Given these results, supplemental unemployment insurance benefits should likely never be implemented again, and states should reject such assistance if offered.”
The study noted that with the initial $600 added money larded on top of standard unemployment benefits “roughly 5 out of 6 people who received unemployment benefits during this time effectively had a higher take-home pay than they did while working.”
“The incentive not to work was most pronounced at lower income levels where total unemployment benefits were a multiple of an unemployed person’s previous income,” the report said.
The report noted that early in 2021, when President Joe Biden signed legislation extending a $300 a week supplemental benefit through September, March of that year “saw a then-record high for unfilled job openings, followed by four more new highs in as many months.”
“The first decline in job openings did not come until August, when about half of the states were no longer participating in the supplemental benefit program.”
The report noted that at the end of 2021, only Arizona, Idaho, Texas and Utah had bounced back to equal or surpass pre-pandemic hiring levels, and all exited the supplemental benefit program early.
Because the supplemental unemployment pay came with other welfare programs, “People have been able to spend longer periods of time on government assistance,” the report said.
“Even at higher incomes, the supplemental benefits, in conjunction with other government programs and payments, provided the equivalent of a $100,000 annual income for a family of four in 19 states and the District of Columbia,” the report’s author, E.J. Antoni said, according to JustTheNews.
The programs “created a considerable disincentive for many people to return to work or even to continue working an existing job,” he said.
Overall, he said, “Extending unemployment benefits had a significant negative impact on the ability of communities to recover from the pandemic. Lives and livelihoods were put on hold for a much longer period than was necessary as a result of this wrong-headed policy.”
In commenting on a National Bureau of Economic Research study that largely came to the same broad conclusions as the Texas report, Patrick Tyrrell, research coordinator, and Anthony Kim, research fellow and editor of the Index of Economic Freedom, said in an Op-Ed on the Heritage Foundation website that legislators should heed this lesson.
“Legislators should always ask when a policy proposal crosses their desk: ‘Does this policy proposal increase or decrease the economic freedom of the Americans who voted for me?'” they wrote.
“The state governments that ended the gravy train of enhanced unemployment benefits early in their states made the right decision and gained economic freedom and greater opportunity for their constituents.”
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