‘It saved meals on my desk.’ Defamed by some bosses, unemployment advantages helped People climate the pandemic
“It kept food on my table. It left the lights on, ”Diaz said of the weekly check, which fell well short of her usual income even as the pandemic spiked. “It literally put my son in diapers.”
Given the record-breaking job losses due to the COVID-19 shutdown, Congress approved an unprecedented increase in unemployment benefits last year to meet the moment. Lawmakers dramatically expanded who was eligible to receive the payments, adding hundreds of dollars in extra income to checks every week.
This additional money, slated to expire in early September, provided a financial lifeline for tens of millions of Americans during a century of pandemic. But it has also sparked a violent backlash from employers and some politicians, whose voices have largely dominated the benefit debate.
Republicans in Congress said the generous benefits allowed some low-wage workers to earn more from unemployment than a paycheck, which kept them away from work. After business owners complained about hiring difficulties as the economy reopened this spring, governors in 26 states – all but one Republican – announced that they would be cutting the benefits before it expired to get more people back into work to force.
“Incentives are important, and the massive expansion of federal unemployment benefits is now doing more harm than good,” said Montana Republican Governor Greg Gianforte, who first made the announcement in May.
A majority of Americans support the governors’ decision, suggesting that the benefits that keep people from working have prevailed among the public, and begs the question of whether Congress should, according to a May poll by Quinnipiac University Such generous steps would be taken in future emergencies.
However, research shows that improved unemployment benefits did not appear to have significantly hampered recruitment in a labor market that has been hampered by persistent fears of the virus and the need to care for children until schools fully reopen. And economists largely view the program as a success that allowed Americans to spend money even in uncertain times, thereby helping to keep the economy afloat.
“It is far too easy to say that unemployment benefits … are holding back the recovery of the labor market. That just wouldn’t be true, ”said Gregory Daco, chief US economist at Oxford Economics, a global forecasting and analysis firm. “The political decision to cut benefits has so far been mainly of a political nature. There was very little analysis of the net trade-off. “
Oxford found that the $ 600 weekly increase in unemployment last year for four months in multiple sectors resulted in checks above the average wage for workers in several sectors, including teaching, construction, retail and hospitality. When the extra money dropped to $ 300 last year, benefits outperformed the average wage of fewer occupations.
However, Daco and other economists said the decision to return to work is much more complex than just calculating whether the temporary benefits will pay more than your own salary.
“People don’t compare weekly income to weekly income [unemployment] Benefits, ”said Nicolas Petrosky-Nadeau, vice president of macroeconomic research at the Federal Reserve Bank of San Francisco. “They compare a permanent job with a continuous weekly income with a short-term addition” [unemployment] Payment. At the same time, it is not easy to find a job, so turning down a job offer is also risky. “
There are also broader economic benefits from increased unemployment benefits.
“Giving people out of work money dollar for dollar is certainly one of the best ways to boost the economy,” said Arindrajit Dube, an economist at the University of Massachusetts, Amherst.
Diaz, who returned to work in March, is just one of many workers who said the improved unemployment benefits were critical for them to weather a pandemic that turned their lives upside down. Some took advantage of the benefits of avoiding contracting the virus through personal jobs, while others trained in new jobs, looked after family members, or stayed at home to help children with online schooling.
Tyrone White, 45, of Brockton, who worked in customer service for a financial firm, said he was unemployed last summer when his employer told him he had to go back to the office full-time. He declined because two of his children, ages 11 and 7, were at higher risk from contracting COVID from severe asthma and allergies. He was concerned about passing the virus on to them and also had to stay home because they could not attend personal school.
“I’d rather be at work than sit at home collecting unemployment benefits,” White said. The extra $ 300 means he’s getting more unemployment money than he took home while working. Without the boost, he said, his finances would have been “tight”. Now he is waiting for vaccines to be approved for children under 12 so that his children can attend a personal school and he can get back to work.
Other workers chose to use the benefit financial cushion to improve their skills and find higher paying jobs. That doesn’t help employers who are now in need of labor, but overall it’s a trend that experts say is improving the country’s productivity.
“It may be that [unemployment] allows people to look a little longer and try to find a better job, and that will be better for the economy in the long run, “Federal Reserve Chairman Jerome Powell told the Legislature at a House hearing on Wednesday.
Thomas Conte, 37, from Pittsburgh, is one of them. After being taken off from his job as a prep cook in March 2020, unemployment allowed him to take online courses in information technology.
“I had a revelation: when will I ever have so much time to maybe improve my career and myself?” Said Conte. Three months ago, he got a higher-paying job as an operational support coordinator at a law firm that deals with debt collection.
“I’ve gone from cooking food to sitting in front of a computer, quite a big change, and I’m pretty happy with it,” said Conte. An additional plus: he can work from his apartment, where his two dogs keep him company.
Powell and Biden government officials have rejected suggestions that increased unemployment has been a major barrier to hiring. At Wednesday’s hearing, Republicans pushed Powell, citing a Morning Consult poll that found that 13 percent of unemployed Americans said they hadn’t returned to work because of benefits. A similar proportion of unemployed Americans – 14 percent – cited childcare obligations as a reason for being inactive, while 13 percent said it was due to health restrictions.
Another study confirms the assumption that a small proportion of the unemployed do not look for work because of the benefits. Petrosky-Nadeau and colleague Robert G. Valletta of the San Francisco Fed found that in early 2021, about 14 percent of people turned down a job they would normally have taken because of the additional $ 300 per week unemployment benefit.
The impact is “noticeable but relatively minor” and focused on low-wage sectors, Petrosky-Nadeau said.
“There was not a single state where the typical worker had no incentive to look for work,” he said.
That hasn’t stopped governors in more than half of the states from ending the benefits early.
Unemployment insurance is a joint federal-state program that was launched during the Great Depression. Most states offer up to 26 weeks of benefits that partially replace regular income and are funded by taxes paid by employers. (Massachusetts allows up to 30 weeks.) During past economic downturns, Congress has funded a temporary extension of these deadlines. But it is up to the states to accept them.
According to a March study by the Century Foundation, a progressive think tank, up to 46.2 million people – roughly one in four workers – received at least a week of unemployment benefits during the pandemic. According to the Ministry of Labor, around 13.8 million people received some kind of unemployment benefit in the last week of June.
If unemployment benefits slowed hiring significantly, economists expected job hunting to skyrocket in states withdrawing from the program. According to the online job board Indeed, that did not happen.
“There is no clear indication that the announcements or actual benefits withdrawals have resulted in a tangible and sustained surge in job searches,” said Nick Bunker, the site’s director of economic research for North America.
Indeed measured activity on its website for the past month and found that half of the states that ended or announced the extended benefits increased searches compared to April, while search activity decreased in the other half.
“Some people are willing to wait a little longer because of concerns about the virus, despite the impact on their income from the money being taken,” Bunker said. “There are several issues that need to be resolved before we can see a sustained surge in job-seeker interest.”
But Aneta Markowska, senior finance economist at investment bank Jefferies, noted that more people have jumped back into the job market in states where the $ 300 benefit has expired. She looked at the weekly state jobless claims and found that they decreased an average of 5.2 percent for the first week after the increased payments expired, 13.7 percent for the second week, and 10.8 percent for the third week .
“It looks like people really waited for these benefits to completely pass before going back to work. That certainly gives some validity to the idea that these benefits have limited the options for adjustment to some extent, ”she said. “I would certainly not argue that this is the dominant or the only factor. I actually think that the dominant factor is care and some health risks. “
For Diaz, the $ 300 federal increase begun in late December enabled her to survive a childcare crisis that has helped push millions of women out of the job market. She was able to go back to work in March when her sister moved in to take care of the children, but she said she still owed about $ 18,000 in rent on her two-bedroom apartment from her time off work.
“People talk about it like people sucking out of the system. It’s not like that, ”said Diaz of the increased unemployment. “Nobody gets rich with the $ 300.”
Jim Puzzanghera can be reached at email@example.com. Follow him on Twitter: @JimPuzzanghera.