When 25 governors decided to cut federal unemployment benefits, they expected it to motivate their citizens to return to work. A new study reveals that it backfired and did the opposite.
According to Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, Census Bureau data suggests that recipients didn’t flock to find jobs in the weeks following the first round of state withdrawals.
“Certainly there was no immediate boost to employment during the 2-3 weeks following the expiration of the pandemic UI (Unemployment Insurance) benefits,” said Dube.
Dube used the most recent Household Pulse Survey (HPS), which collected employment data from April 14 to July 5 on 18-to-65-year-olds. The HPS asked pollees whether they had received UI in the past seven days and were currently working.
According to Dube, the share of adults receiving unemployment dropped sharply (by 2.2 percentage points) in the dozen states that cut federal funding on June 12 or 19. He said that it translates to a 60% reduction in unemployment payouts in those states.
Perhaps the most surprising statistic is the one that reveals unemployment INCREASED by 1.4% after governors cut the federal benefits.
Conversely, there was a 0.2% increase in employment in states that kept federal benefits going.
Though the data indicates there wasn’t an immediate job boost following the cuts, Dube said that more time and information would be necessary to analyze the longer-term effects of state policies.
Susan Houseman, research director at the W.E. Upjohn Institute for Employment Research, reviewed the findings and said, “There’s not early evidence [federal benefits] were a big constraint [on jobs].”
Like Arizona’s Doug Ducey, some governors had the noble idea that removing the benefits would encourage employment if they were redirected.
He chose to pay Arizona residents when they attained part or full-time employment. “In Arizona, we’re going to use federal money to encourage people to work…instead of paying people not to work,” said Ducey.
Other governors chose to put that money in a statewide lottery, which highly offended citizens, like Susan Hardy, who was genuinely unable to return to the workforce.
Hardy is responsible for caring for her six grandchildren. She relied on weekly payments to care for her son as well, as he doesn’t qualify for unemployment benefits. Though she has been seeking gainful employment, she has been unable to find work as an oil and gas title researcher.
“I don’t even know what my grandkids are going to have for dinner tomorrow, but West Virginia is giving the money away right and left,” said Susan Hardy. “That was a huge insult.”
Hardy also commented, “With me caring for six grandchildren, plus my age, I can’t go out and work at McDonald’s, or another restaurant, or in a warehouse.”
A plethora of Americans have retired, while many are still afraid of contracting or passing on the coronavirus.
A US Census Bureau study from May confirmed that far more people collecting unemployment benefits now report that they cannot work because they are caring for children or elderly relatives.
Jardy is not alone, either, as dozens of West Virginia citizens wrote to their governor and begged him to keep the federal benefits. She never heard back.
Governor Jim Justice (R-WV) claims that there are plenty of jobs available, and his citizens should not have any trouble finding a job.
“West Virginians have access to thousands of jobs right now,” Justice said when he announced the cut-off. “We need everyone back to work. Our small businesses and West Virginia’s economy depend on it.”
What he fails to realize is that the jobs available aren’t suitable for all situations. Many positions available are fast-food or entry-level jobs and would not provide sufficient financial support for someone like Hardy.
Citizens in other states are taking a different approach and are suing their governors — and winning.
In Indiana, two organizations sued Governor Eric Holcomb, the lawsuit stating that “By prematurely deciding to stop administering these federal benefits, Indiana has violated the clear mandates of Indiana’s unemployment statute — to secure all rights and benefits available for unemployed individuals.”
Marion County Superior Court Judge John F. Hanley blocked Indiana’s benefit shutoff in June. He found a “preponderance of evidence” that supported the plaintiffs’ argument that the plan violated state law.
Even after their stay was denied and the court ordered that the benefits be reinstated, Indiana is still trying to fight the court as Governor Holcomb filed an appeal on Tuesday.
Maryland workers filed their own class-action lawsuit on July 1, questioning whether or not Governor Larry Hogan had the authority to suspend PUA payments. They argue that Hogan’s decision to cut off the federal unemployment benefits violated state laws governing the administration of unemployment programs.
Judge Lawrence Fletcher-Hill blocked the benefit shutoff, finding that the “personal magnitude of the harm associated with losing benefits for plaintiffs and other individuals currently receiving them is greater than the purely fiscal impact on the state of being required to continue to administer these benefits.”
The judge also noted that state law requires the Maryland labor secretary to use all available federal unemployment benefits.
The Biden Administration has ultimately been no help for American citizens and seems to have essentially washed their hands of responsibility.
White House press secretary Jen Psaki seemed to tuck her tail in an attempt to avoid responsibility on the matter.
In a press conference in June, she said that “those governors who have made the decision, as they have every right to do, to pull back on unemployment benefits.”