Opinion | Pandemic Jobless Benefits and Work

A sign announcing open positions hangs in front of bistro in Roswell, Ga., Nov. 13, 2021.



Photo:

Robin Rayne/Zuma Press

Covid-19’s Omicron variant is causing new business disruption, but the good news is that continuing jobless claims have fallen to the lowest since March 7. Companies are having a hard time finding workers, and a new National Bureau of Economic Research working paper shows the job market would have bounced back even faster without expanded unemployment benefits.

Congress at the outset of the pandemic increased the generosity of unemployment benefits while extending eligibility to many Americans who previously would not have qualified, including independent contractors and part-time workers. The maximum duration of benefits was extended to as many as 99 weeks from the typical 26.

This benefit boost made some sense in spring 2020 when government shut down businesses. But as states lifted restrictions, many employers struggled to hire and blamed unemployment benefits. Many workers could make more by staying unemployed thanks to the $300 weekly bonus, which was on top of regular benefits that average 30% to 50% of prior wages.

Congress in December 2020 extended the pandemic perks through mid-March, and then Democrats extended them again through Labor Day. The Biden Administration dismissed claims that benefit plus-ups were discouraging people from returning to work as merely “anecdotal.” Economists

Harry Holzer,

Glenn Hubbard

and

Michael Strain

now offer strong empirical evidence.

Most Republican-led state governments ended the extra benefits early, providing a real-time experiment. The economists examined the transition from unemployment to employment in the 18 states that ended the $300 weekly bonus and eligibility expansion in June.

Using data from the Bureau of Labor Statistics monthly household survey, they estimate that early termination of these two programs was associated with a 14 percentage-point increase in the flow from unemployment to employment in July and August among 25-to-54 year olds (using February to June as control period).

They then extrapolated that the unemployment rate among prime working age Americans in the 24 states that maintained the richer benefits through Labor Day would have been 0.7 percentage points lower in August had they ended benefits in June. The national unemployment rate would have been 0.3 percentage points lower had all states ended benefits early.

Three states (Alaska, Florida and Ohio) ended only the $300 weekly bonus early and kept the eligibility expansion. The economists estimate that the $300 fillip accounts for only a little over half of the effects on employment they found. So the eligibility expansion in and of itself kept many workers on the sidelines.

This conclusion is also borne out by the Labor Department’s claims data. In late August, continuing claims were about 12 million, yet jobs that month were only five million below pre-pandemic levels.

The economists are at pains to say the effects of expanded unemployment benefits on work “are quite modest when compared to the likely effect of Covid-19 itself.” Maybe. But the fact that unemployment claims are falling even amid the fast-spreading Omicron suggests that the virus may not be as important as many believe. This bears watching as Omicron spreads in the New Year.

The study also finds that people who had more confidence in their ability to meet expenses were less sensitive to the termination of expanded benefits. That’s no surprise, and the $300 per child tax allowance that the Administration began sending out in July as monthly checks likely offset the disappearing unemployment benefits for some Americans.

Democrats may have undermined their welfare-state expansion with their $1.9 trillion pandemic spending splurge last spring. The enormous transfer payments reduced labor supply while pumping up consumption, contributing to inflation and falling real wages that gave

Sen. Joe Manchin

good and ample reason to reject the Build Back Better Act

Journal Editorial Report: Paul Gigot interviews Dr. Marty Makary. Images: AP/AFP/Getty Images Composite: Mark Kelly

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