Ending Unemployment Insurance Did Not Increase Jobs, Early Data Indicates

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According to new data, the push by states to fill vacant jobs by ending unemployment benefits was not fruitful.

Using recent data from the Household Pulse Survey collected by the U.S. Census Bureau, Arindrajit Dube, economics professor at University of Massachusetts Amherst, found that the elimination of pandemic-era unemployment insurance did not lead to an increase in employment.

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Dube assessed data from the HPS which asks whether the respondent received UI in the last 7 days, which allows the assessment of the impact of the policy expiration on receiving benefits. He assessed the short-term impacts of the June unemployment benefits expiration. The HPS survey also asks whether the respondent is currently working, which allowed him to evaluate the employment impacts. The most recent data was valid through July 5, 2021.

Interestingly, he found that in states that ended unemployment insurance early, employment actually declined 1.4% over the same period while it rose by 0.2% in the states that did not end pandemic unemployment insurance in June.

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Dube notes that more data and time is necessary to see the long-term effects the cut to unemployment insurance will have one the job market. Specifically of interest is whether or not small business owners and those in the hospitality industry will be able to fill the positions they have so desperately needed but have had trouble filling, claiming UI as a reason.

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Dube’s findings are in line with recent analyses published by the job site Indeed, which found that job-search activity was muted in the states that cut federal benefits, CNBC reports. Economists they surveyed said this was the opposite of what would be expected given the policy goal.

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The findings suggest that workers are holding out for better positions rather than taking the first available job presented to them. It could also suggest that those receiving unemployment benefits have some sort of secondary financial support, be it through a spouse or money they’ve saved during the pandemic.

Gratuitous unemployment benefits have been a point of contention amongst recipients and the governors of the states doling them out. Over half of the nation’s states opted to end unemployment benefits early, citing tight labor markets and an overabundance of jobs.

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Although this early data is not enough to solidify a trend, it suggests that the receipt of unemployment benefits might not be the driving force behind what’s keeping potential employees from open positions.

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Last updated: July 27, 2021

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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