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