US Economy: States That Cut Benefits Not Seeing More Job Gains As Promised

States that have cut federal unemployment benefits are not having their intended result of bringing more Americans back to the workplace compared to those maintaining assistance programs.

In research-study reviews cited by Reuters, the states that eliminated a $300 monthly unemployment payment to offset pandemic-related job losses this summer did not see any significant windfall in new hiring. These states, largely led by Republican governors, argued that such cuts would do more to stimulate their economies by removing what they consider a disincentive to returning to the labor force.

But new hiring appears to differ little between states that cut federal unemployment benefits and those that did not, according to the analyses. One found that those states that cut benefits saw as much as a 6% increase in the number of jobs found by job seekers. However, it also found that these states struggled more to bring workers back into the formal workforce.

Jed Kolko, a chief economist at the job site Indeed, wrote on Twitter that job losses were more severe in non-cutoff states but that is because they differ from cutoff states in terms of their mix of industries and jobs. A second study from Goldman Sachs found that the gains in cutoff states were most felt in lower-paid occupations, but cautioned these same jobs were most susceptible to losses caused by COVID-19.

“For now, the punchline is that job growth has been essentially the same in both [universal income] cutoff states and other states since May, even though the unemployment rate fell more in UI-cutoff states,” Kolko wrote on Twitter on Aug. 20.

These findings take on a particular urgency amid a nationwide surge in COVID-19 infections because of the virus’ Delta variant. Federal unemployment benefits were extended throughout the pandemic, but nationally they are slated to end on Sept. 6. if nothing is done to extend these programs.

Concerns about another slowdown due to the Delta variant have prompted some conversations about whether or not new aid would be needed to head off a decline.

In a letter on Thursday from Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh to the heads of the Senate Finance Committee, the two wrote there are some states, "where it may make sense for unemployed workers to continue receiving assistance" past Sept. 6. even as it can be allowed to expire in others.