Economy

People are leaving unemployment rolls faster in states that are ending enhanced benefits

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A new report in the Wall Street Journal (WSJ) quotes an analysis from economists who found that states that have opted out of enhanced federal unemployment benefits have seen more than twice as many workers leave the unemployment system and return to work compared to states that are keeping the federal unemployment benefits in place. 

The American Rescue Plan Act (ARPA), passed in March, extended the enhanced benefit of an additional $300 per person per week to last until early September. States can choose to opt out of the extra cash before then, though, as Missouri and 25 other states have done or have planned to do by July 10.

States must give the U.S. Department of Labor a 30-day notice before opting out, hence the staggered changes.

Per the WSJ, in states that said benefits would end in June, the number of people receiving benefits through regular state programs fell 13.8% from mid-may to June 12. That number dropped 10% in states ending benefits in July, and it dropped only 5.7% in states where benefits end in September as outlined in the ARPA. 

The amount of people receiving unemployment in states ending enhanced benefits in June decreased by well more than double that of states keeping benefits in place until September. 

The analysis reported by the WSJ was conducted by Jefferies LLC economists.

Though the unemployment benefits are surely contributing to the labor shortage, it is still a complex issue with several causes.

For one, child care is an obstacle for some. The WSJ article contains an interview with a woman who was furloughed from her work-from-home corporate-travel agent job but still receives health insurance benefits from that employer. Those benefits expire, though, if she gets a new job.

She was being paid $26 an hour and was able to take care of her children as she worked from home. She has not found a job that meets all of those needs as her previous one did, and many Americans find themselves in a similar position.

In a recent U.S. Census Bureau questionnaire, over 6.9 million people said they were caring for children not in daycare. In the same survey, over 828,800 people said they did not have transportation to work.

To blame the labor shortage solely on the enhanced benefits would be shortsighted. Nevertheless, the Jefferies LLC analysis suggests they are a substantial contributing factor.

Others include lingering hesitancy over COVID-19, despite updated CDC guidance and wide availability of vaccines, and caring for elderly members of one’s family, not just children.

A welcome change coming to Maine is the Department of Labor implementing more extensive security measures to prevent fraud through unemployment applications, through a service called “ID Me.”

While the current labor shortage is surely more nuanced than politicians on either side of the aisle would care to admit, there is little sense in paying Mainers to stay at home when employers desperately need help to resume their operations to full capacity. Maine should join the 26 other states in ending enhanced federal unemployment benefits, which coupled with the governor’s new Back-to-Work program, might actually get Mainers back into the workplace.

About Nick Linder

Nicholas Linder, of Cincinnati, is a communications Intern for Maine Policy Institute. He is going into his second year of studying finance and public policy analysis at The Ohio State University. On campus, he is involved with Students Consulting for Nonprofit Organizations and Business for Good.

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