Despite the rationale behind terminating extended unemployment benefits, there is little evidence to prove that it will lower unemployment.
In response to the COVID-induced economic recession, the federal government increased unemployment benefits. Under the Unemployment Insurance Extended Benefits program, Federal Pandemic Unemployment Compensation (FPUC) offered a $600-a-week federal bonus to the unemployed on top of existing state-level benefits. Eventually, this bonus fell to $300 a week and was terminated nationwide this past Labor Day, September 4.
Eventually, this bonus fell to $300 a week and was terminated nationwide this past Labor Day, September 4.
Those extended unemployment benefits not only put food on the table for workers who were unable to find jobs, but also ensured consumers were spending in the economy, buying the goods and products they needed. This worked to ensure the economy did not fall deeper into the recession which was brought on by the pandemic. The recent termination of those benefits happened amidst claims that a cut in unemployment benefits would increase employment and help to address the nationwide labor shortage. There is little evidence, however, to prove that terminating extended unemployment benefits will lower unemployment.
In spite of evidence proving that unemployment will not necessarily decrease once additional unemployment benefits are cut, almost half of the states decided to get rid of them even earlier. Research coming from the Economic Policy Institute (EPI) based on analysis of data from early state-level unemployment terminations has shown that any potential gain to job growth driven by lower benefits is offset by what economists refer to as the “consumer demand effect.” This effect describes the situation in which households tend to spend less when unemployment benefits are reduced, ultimately leading to a drag in job growth. On top of that, new research has found that early termination of extended benefits only led to a small increase in job finding.
The previously-mentioned research from EPI shows that although earnings from work rose by $14 per unemployment recipient per week in states that cut off benefits before the September deadline, unemployment income fell by $278 a week, leaving recipients with a net income loss of $263 per recipient. The study showed that because they had lower incomes, unemployment recipients spent $145 less per week, which not only contributed to less money being put in the economy, but also a downfall in the Consumer Confidence Index. Additionally, a recent study showed that only a small percentage of those losing unemployment benefits were able to find jobs.
Despite evidence of unemployment insurance benefits during turbulent times, conservative voices still dominate the media and push the opinion that living off welfare promotes laziness. Senate Minority Leader Mitch McConnell said in May 2021 that the federal government should end “the special bonus given for people to stay at home.” Ted Cruz, Republican Senator from Texas, also said that those who are now going to lose the benefits should get a job, suggesting: “Um, get a job?”
Without a clear understanding of unemployment insurance and how it protects the most vulnerable, arguments such as “just get a job” miss the bigger picture of the need to continue offering benefits. Not only did extended unemployment insurance keep people afloat, preventing them from falling into poverty, but it also acted as a safeguard against the imminent collapse of the economy. By cutting unemployment benefits, we do not reduce laziness in people. Instead, we end up hurting the economy and putting those who are in vulnerable positions under even more strain.
Unemployment insurance can aid those who are often failed by the socioeconomic system. In the American story of pulling yourself up by your bootstraps, these are the people who are often targeted and told to put in the work required to build the wealth. What often gets left out is the amount of people who failed—or better said, who were failed by the system.
If we accept that our current economic system has failures, and that the people at the bottom are the ones facing the most harmful consequences, we must find ways to empower the most vulnerable individuals and make sure to give them a decent standard of living. A person relying on unemployment benefits is not lazy—rather, they have found themselves in a system in which the jobs in an area do not pay enough for rent, or perhaps soewhere where there are no jobs.
The myth of the person claiming unemployment insurance to rip off the state doesn’t stand firmly when we look at the data for average weekly unemployment payments before the pandemic. Average pre-pandemic payments were $387 nationwide, ranging from an average of $215 per week in Mississippi to $550 per week in Massachusetts. For reference, if someone working at Bowdoin pre-pandemic on $17 an hour were to go and claim unemployment for a maximum of 26 weeks, with other conditions applying, they would receive $600 a week, which amounts to $7.25 per hour. If they were to receive the extra $300 on top of that, they would have gotten closer to $11. Either way, the income they receive is not near the level of a decent living wage.
The additional unemployment benefits should have continued well beyond September 4, and more should be done by the the government—and by us—to defend such programs and promote their expansion. Thinking that this only prevents laziness represents in itself the lazy way people are analyzing the program—with disregard to overall economic trends and how they can help people not fall into the poverty trap. If we don’t make a change, the government will have to bear more costs for individuals as a result of addiction, incarceration, violence and other deviant activities which can be a result of a person’s troubled financial situation. By ensuring that people have enough to eat and live off of, not only do we restore people’s dignity, but we prevent the economy from further going down a spiral of debt.
Radu Stochita is a member of the class of the class of 2022, Song Eraou is a member of the class of 2023.