Unemployment: States cutting benefits seeing financial hardship — but not job gains

·Reporter
·3 min read

The early cancellation of unemployment benefits in certain states didn’t get their residents back on the job as intended, new research found. Rather, it led to greater financial hardship.

The 12 states that ended the programs in mid-June saw no increase in workers getting jobs in the two to three weeks after the expiration — and some even saw employment decline during that time, according to an analysis of the Household Pulse Survey (HPS) by Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.

At the same time, the percentage of people reporting difficulty paying for usual household expenses increased in those states, while the share edged down in states that kept the unemployment programs intact.

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“It’s very likely that the uptick in reported hardship is related to the expiration of unemployment benefits,” Dube said. “It’s happening exactly in the same states, and exactly at the same time. The number of additional people saying they’re having difficulty paying for usual expenses is close to the number of people who saw reductions in unemployment benefits.”

No gains in employment

Twenty-six states cut off the extra $300 in weekly benefits in June or early July, while 22 of them also canceled the Pandemic Unemployment Assistance (PUA) program for workers who don’t normally qualify for regular unemployment insurance and the Pandemic Emergency Unemployment Compensation (PEUC) program that provides extra weeks of benefits.

The federal expiration for these programs is September 6.

Amid a year of unemployment, one job applicant fills out paperwork for hospitality employment during a job fair on June 23, 2021 in Torrance, California. (Photo by Patrick T. FALLON/AFP)
Amid a year of unemployment, one job applicant fills out paperwork for hospitality employment during a job fair on June 23, 2021 in Torrance, California. (Photo by Patrick T. FALLON/AFP)

In the states where the benefits expired June 12 and June 19, the weekly employment-to-population ratio — the number of people employed against the working-age population — declined by 1.4 percentage points, while it increased by 0.2 percentage points in states that didn’t opt out of the programs.

“For those with hope that the expiration would quickly push people into employment, that hasn't happened,” Dube told Yahoo Money, “even as they lost that source of income.”

‘Uptick in reported hardship’ amid unemployment

What did follow was financial hardship.

In those 12 states, there was a 3.7-percentage points increase in those saying that paying for expenses has been “somewhat difficult” or “very difficult,” the analysis found. At the same time, the share of the population receiving unemployment benefits in those states decreased by 2.3 percentage points.

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“The fact that more people report hardships than losing [unemployment] benefits eligibility makes sense, as even those who remain eligible experience a sizable $300/week cut in benefit level,” Dube wrote in the report.

Overall, more than 4 million workers are affected by early cutoffs in the 26 states, losing a total of $22.5 billion in potential benefits, according to estimates by the Century Foundation. Nearly 3 in 5 workers affected by the early expiration will be left with no benefits at all.

“There’s the argument that jobs are plentiful and easy to find and so if you get rid of unemployment benefits, people will quickly transition into paying jobs,” Dube said. “That definitely doesn't seem to have happened.”

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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova

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