Unemployment Benefits

California, New York Have the Most To Gain From Ending Bonus Unemployment Benefits. They Probably Won't.

States that already had lower unemployment rates in May are more likely to have announced plans for ending the bonus unemployment payments.

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Consider this your periodic reminder that economic incentives matter: Available job postings appear to be getting filled more quickly in states that are paying fewer benefits to people who are unemployed.

There's a real-life economic experiment happening across America right now, as 26 states have taken steps to limit or eliminate the $300 per week "bonus" unemployment benefits that are paid by the federal government and layered atop whatever state-level benefits unemployed workers receive. Those federally boosted unemployment benefits—a temporary measure enacted due to the COVID-19 pandemic—are set to expire in September.

But some states are doing away with them before that deadline in hopes of spurring a faster labor market recovery. In the states that were quickest to cut off the bonus unemployment payments, The Wall Street Journal reports, that strategy seems to be working out.

"The number of workers paid benefits through regular state programs fell 13.8 percent by the week ended June 12 from mid-May—when many governors announced changes—in states saying that benefits would end in June, according to an analysis by Jefferies LLC economists," the Journal reports. "That compares with a 10 percent decline in states ending benefits in July, and a 5.7 percent decrease in states ending benefits in September."

There are more than 9 million jobs available across the U.S., according to the Bureau of Labor Statistics' most recent update. There's also widespread anecdotal evidence that employers are having a hard time finding workers to fill open positions. "America's great economic resurgence is being held back by an unprecedented workforce shortage—and it's getting worse," says Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber of Commerce.

But the degree to which temporary federal unemployment benefits are contributing to this situation remains subject to debate. In fact, The New York Times published a piece on Sunday that drew almost the exact opposite conclusions as the Journal's article did. After suspending the extra $300 per week jobless benefits on June 12, Missouri employers expected to see "a flood of job-seekers" but were left disappointed, the Times claims.

It's probably true that the bonus federal unemployment benefits are not solely to blame for the labor market's slow recovery right now. But they are almost certainly contributing to the situation.

Potential workers who aren't reentering available jobs "could be caring for family due to pandemic restrictions on in-person schooling, enjoying an early retirement, or waiting for the right job to open up," Michael D. Farren, a research fellow for the Mercatus Center, a free market think tank, wrote earlier this month here at Reason. But those other factors seem to account for only a small share of the declining workforce, Farren concluded, leaving "the federal expansion of unemployment insurance as a major driver of workers' decisions to remain on the sidelines."

Other economic studies suggest the same. A 2014 study from the Federal Reserve Bank of St. Louis that examined the effects of extended unemployment benefits during and after the 2008 economic crisis found that "longer benefits may reduce unemployed workers' job search efforts, decreasing their likelihood of becoming reemployed." The circumstances now are slightly different, but the decision to extend those bonus federal unemployment benefits all the way until September—a decision that federal policymakers made in March, when it was clear the pandemic was coming under control and the economy was recovering—almost certainly had an impact on some would-be workers' economic incentives.

The shifts in unemployment benefits have become something of a Rorschach test because we don't yet have any empirical data regarding how unemployment rates shifted in the wake of various states cutting off those bonus benefits. The four states that led the way in cutting off the $300 per week federal unemployment bonus didn't do so until June 12, and the most recent Bureau of Labor Statistics data on state-level unemployment is from May. June's data won't be released for another few weeks.

But here's one thing we can say with certainty: The states that have the most to gain from cutting off extra benefits in the hopes of nudging workers back into available jobs are, for the most part, not doing that.

The Committee for a Responsible Federal Budget (CRFB) has been tracking which states are ending the boosted federal unemployment benefits, as well as when the added payments will terminate. Here's their most recent update on the 26 states that have terminated or announced plans to terminate the $300 federal benefits boost.

Here's how it looks when that same information—color-coded in the same way—is arranged to show the states ranked by their respective unemployment rates.

It's far from a perfect correlation, of course, but there's a clear trend here. States that already had lower unemployment rates in May are more likely to have announced plans for ending the bonus unemployment payments in June or July. We'll have to wait a bit to see how that changes this distribution, but it seems likely to only deepen the divide between places that are emerging from the pandemic with healthy economies and those that are lagging behind.

But this is also something of a chicken-or-egg problem. When the Times goes spelunking into Missouri to find that there hasn't been a "flood" of new job-seekers since the policy change two weeks ago, maybe it is only identifying the fact that unemployment in Missouri was already about half as high as it is in, say, New York.

This is an ongoing experiment so it's probably not fair to draw any serious conclusions just yet. But if New York or California announced plans to cut off that bonus $300 per week federal unemployment boost before September, it seems likely that the results would be more dramatic than what's happening elsewhere.

NEXT: Cigars Aren't Cigarettes. A New Bill Proposes That the FDA Regulate Them Accordingly.

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  1. Everywhere I go there are help wanted signs. Businesses are closing early because they’re short staffed. I’ve had medical appointments postponed for the same reason. I see signs wanting skilled people and unskilled people. I haven’t looked at professional job postings, these are just the signs I see as I go about my day.

    There’s only one excuse for all these people being unemployed: they want to be.

    1. And who wouldn’t stay at home and do nothing for the same money as commuting to a job every day? Or even 80% of the money?
      I worked for 45 years, and have been retired for 5 years.
      Not working is better. That is why they have to pay you to go to work.
      When the state pays you to stay home, it is a better “job” than most you can get in the real world if you do not have specific technical skills (or are a licensed truck driver).

      1. I wonder how this has affected prostitution?

    2. I went to school for art appreciation until their is a job posted in that field, I’m staying home – you can get your own Starbucks.

      1. We are all amazed that you are trained to fully appreciate the art in the perfect meshing of politics and “press” that now rules us all.

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        1. That was for “Sometimes a Great Notion”.

    3. Same. I just got back from vacation, and every establishment in every beach town is desperate for work, offering good money for totally unskilled labor that in prior years was often filled by Irish or Filipino teenagers.

      1. There’s a wrinkle I didn’t think about. Immigration. Between Trump’s xenophobia and pandemic restrictions, there just aren’t enough foreigners to fill the positions.

        1. We don’t have that many illegals where I live. Yet we have the same problem. Also, Trump is pro immigration, but anti illegal.

          But you already knew that, didn’t you?

        2. “…Between Trump’s xenophobia…”

          TDS-addled lefty assholes make this claim constantly, and yet not a single one of them can point to a specific example.
          So my question is this: Were TDS-addled lefty assholes this stupid before they contracted TDS, or did the onset of TDS make those lefty assholes this stupid?
          Oh, and TDS-addled lefty assholes are welcome to respond, TDS-addled lefty asshole

          1. Well the leftists’ intentional conflation of illegal aliens with lawful immigrants has been going on for decades, so the answer to your question is obviously stupid before, during, and after.

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          2. Their stupidity preceded their diagnosis. One might call it a pre-existing condition.

  2. There is no legitimate argument that keeping this benefits in place is needed nor necessary, if they ever were needed or necessary. It will take two decades to fully recover from this shutdown.

  3. Rich white people can’t imagine that people would actually choose unemployment.

    1. Especially when they’re being paid not to work thanks to the rich white people’s taxes.

  4. Probably not true in MOST blue states.

    There are those who think threatening people with Gov-Guns = Wealth.
    And those who think Creating Value = Wealth.

    Would a conclusion that the criminal states would spend more time terrorizing the streets when their *free* stolen money got cancelled than looking for a job than the non-criminal states really be so far-fetched a theory.

  5. Stealth UBI, proven to work, slackers unite!

  6. Newark,DE. Dupont trying to hire unskilled plant workers at $24.50/hr with good bennies. Can’t find acceptable hires.

    1. What’s the UE benies there? Who runs the statehouse?

  7. Plenty of the “unemployed” are double-dipping at this point. I’ve seen and heard of a lot more people asking for cash payments.

  8. LOL…..Gov Nusance is to busy giving away money that goes to the legal residents to illegals in his sanctuary state of criminally released and broken law enforcement….he was going to give all legal residents a tax refund of $600 but decided to use this excess for bragging about his wonderful distribution to anything but the lawfully intended legal citizens….This sissy boy is a worthless political ape who cannot govern and obey the rule of law…

  9. In progressive dream world, people will naturally seek to seek employment because, well it’s just the right thing to do as a reasonable responsible caring adult. In the real world, it doesn’t really work that way of course. But hey it’s a good way to use public funding to buy votes!

  10. This is some impressively bad economics. Everyone who’s compared states with and without the $300 has found no difference in hiring — the issues are childcare, or worry about dealing with unvaccinated people, or in a lot of cases, a hope that they can do better than the cruddy $10/hr jobs on offer.
    What the extra unemployment definitely does is to pump that $300 into the local economy every week, increasing demand and business incomes. Only innumerate fools would want to give that up.

    1. Cite? Not familiar with this “everyone” of whom you speak.

    2. If it’s so great, why not make it $800?

    3. The broken windows fallacy is a fallacy even when govt is using other people’s money.

    4. That’s because everywhere still has federal eviction/foreclosure moratoriums, effectively eliminating the largest living expense. I can only hope they actually end it as planned at the end of this month, but something tells me they will extend it yet again (if they haven’t already).
      And don’t forget this is on top of normal state level unemployment, medicaid, snap, chip, suspension of student loan payments, the thousands of dollars people have received in stimulus over the past year and the thousand other welfare programs in place. The effect isn’t that noticeable because compared to the grand scheme of all welfare programs, the $300/week isn’t that large.
      BTW, that $300/week is printed money and increasing the money supply. It’s main effect on the economy is increasing (the already high) inflation, not pumping up the local economy.

    5. > What the extra unemployment definitely does is to pump that $300 into the local economy every week, increasing demand and business incomes. Only innumerate fools would want to give that up.

      Aren’t all news reports pointing to the fact that aggregate demand is too high? Not enough workers for service businesses. Not enough containers for imports. Not enough chips for cars. UPS/FedEx telling their biggest customers to stop sending so many packages. Not enough houses for buyers. You can’t grow an economy that is working at full capacity by adding demand, because there is nothing left to buy. The economy will grow as capacity increases, which requires time as corporations invest in capital assets and workers retrain for needed skills. Dumping money into the economy now just forces it further into the supply shock and makes it harder to get back into a healthy equilibrium.

  11. So, what I am hearing is that the libertarians are complaining about an exogenous change in the reservation wage of labour, or the opportunity cost of having a job. Yet, don’t seem to believe that the free market will respond appropriately. Thus, we must undo this exogenous change in the reservation wage so that the labour market does not have to adjust accordingly, i.e. by increasing the wage.

    From the perspective of pure economic theory, changing the reservation wage of labour is one of the most efficient ways the government can influence the labour market. It does not restrict anyone’s choices or behaviour, as a minimum wage does. It does not increase the frictions already present in the market. In fact, at the place where this higher reservation wage will bind, this policy will increase the wage elasticity of the supply of labour to an individual firm. Since the estimates of the wage elasticity of labour supply facing an individual firm are all below 5, whereas in a perfectly competitive labour market the wage elasticity of labour supply facing an individual firm is infinite. Thus, this policy is actually pushing the labour market closer to the perfectly competitive labour market. That is a strange thing for libertarians to be complaining about.

    1. A govt. policy pushing (creating) “the perfectly competitive labour market”?
      Yea, in your drug addled dreams! Socialism is putting the end before the means, ignoring bad results, ignoring economics, ignoring the initiation of force against the innocent.

    2. Libertarians would have no problem at all with this, if it didn’t involve the government handing out ~$2,500 / month to people to not work. If this labor shortage was caused people retiring with healthy 401ks, libertarians would be celebrating and pointing to how well the market was working.

      The problem is that because this is being caused by the government shoveling out breathtaking amounts of money you have 1), all the problems that massive government spending brings, and 2) because the policy is so expensive, it is necessarily temporary. Which will lead to 4+ million people simultaneously dumped onto a job market that is currently in the process of creative destructing its way to not needing them anymore. The highly labor efficient Amazons and Costcos of the world are doing fine. Is that all we want to have left? Organizations world famous for their automation and low human contact?

  12. Governments get what they subsidize, e.g., paying not to work gets less working, more unemployment. States that pay less, get less unemployed.
    Undocumented, outliers, get no subsidy, so they will fill the gap, and when the subsidy runs out…? Opps, that free money suddenly cost you your future.

  13. The Republicans and many business executives, blame the extended unemployment benefits for the current low labor force participation rate. Their view is that once unemployment benefits end, the workers will have no choice but to take any job available. Possibly, those Republicans did not see the advertisements that run on cable TV from disability law firms. As I described in “Current REML Yield Now Above 16% And The Dividend Likely Will Increase” Republicans are correct that some are collecting unemployment compensation rather than seeking work.
    This is especially true when extra unemployment benefits cause the unemployment compensation to exceed the take-home pay available from some jobs. Thus, cutting people off from unemployment benefits can force some to accept jobs at lower wages than they would have accepted if unemployment benefits were still available. However, for many the most attractive alternative is to file for disability benefits, which pay about as much as unemployment benefits. Disability becomes an even more attractive alternative than unemployment for those who lose medical insurance when they become unemployed. Collecting disability benefits makes one automatically qualified for Medicaid, while collecting unemployment benefits does not.

    The extra $300 per week in unemployment benefits expires in September 2021 and there are no prospects for extending it. Already some states have either stopped providing the extra benefits or plan to do so before the September expiration. The amount of weeks that regular state unemployment benefits can be received is running out or has already run out, for many who lost their jobs because of the pandemic shut-downs. Thus, we will see whether there will be repeat of the events of the last decade which caused millions to leave the labor force and join the disability rolls.

    On December 28, 2013, the Federal Emergency Unemployment Compensation Extended Benefit programs expired. This meant that 4.9 million people who would have received unemployment benefits for more than 26 weeks, would no longer get them. Until that day, most states provided jobless benefits for between 63 and 73 weeks. On that date all state limits were reduced to either 20 or 26 weeks and all those who had been collecting the extended benefits were suddenly cut off.

    The Emergency Unemployment Compensation program, had been extended four times since 2008, and was scheduled to expire on December 28, 2013. Around the time of the 2013 expiration, the House had passed extensions of the extended benefits. However, in the Senate, the bills to extend the benefits received between 55 and 59 votes, which were never enough to break the Republican filibuster. The direct consequence was the slowest economic recovery on record, as many who lost the extended unemployment benefits filed for disability.

    For the rest of the decade, real annual GDP growth was around 2%. GDP growth can be expressed as the product of labor input and productivity. During the period of the 1950s and 1960s real annual GDP growth of around 3% was achieved with about 1.5% labor force growth and about 1.5% growth in productivity. After 2013, productivity continued to grow around 1.5%. However, labor force growth was only around 0.5%. Thus, real annual GDP growth was only around 2%. The number of people now receiving unemployment compensation is higher than it was in 2013. Thus, the departure from the labor force by those whose unemployment benefits end, may be even higher.

    Many may be reticent about filing for disability, because they are not really disabled. However, law firms specializing in obtaining disability benefits, aggressively advertise, recruiting those whose disability claims may be dubious. A recent advertisement on cable television showed an apparently able-bodied individual gleefully throwing currency into the air and exclaiming that when the law firm advertised obtained disability benefits for him, he felt like he “had won the lottery”…” https://seekingalpha.com/article/4435973

  14. Bestest economic philosophy ever:

    Taking money from poor people improves their lives.

    Giving money to rich people improves their lives.

    1. Best economic philosophy ever:
      Make the SLAVES who “enrich” other lives by *creating* goods PAY for self-entitled social justice clowns who don’t want to *EARN* the goods they consume.

      And the theory of ‘slavery’ lives on; Almost entirely held by the same party blaming everyone else for their own motives.

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  16. The extension of the $300 bonus has two effects the Dems want. First, it forces businesses to raise wages to lure people off unemployment – essentially giving them the minimum wage increase Dems in Congress could not pass – but only in blue states. Second, all the businesses clamoring for workers is a boost to the pro-illegal immigration wing. “See, we need all these ‘undocumented workers’ to keep,our economy going.” Don’t be fooled; it’s all political.

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