Eliminating extra unemployment benefits won’t solve worker shortages, study finds

·Reporter
·4 min read

As nearly half of states opt out of the extra weekly unemployment benefits to combat worker shortages and spur hiring, new research shows those efforts may be futile.

The extra pandemic-era unemployment benefits largely don’t keep workers from accepting new jobs, according to a new paper by the Federal Reserve Bank of San Francisco, because the total amount in benefits — while higher than usual — is not enough to offset other long-term advantages of being employed.

If seven out of 28 unemployed workers received job offers they would normally accept, only one declined because of the extra $300 of weekly unemployment benefits, the paper found.

“Jobs are very long lasting and unemployment payments are fixed in duration,” Nicolas Petrosky-Nadeau, author of the study and vice president of macroeconomic research at the Federal Reserve Bank of San Francisco, told Yahoo Money. “You're [not only] turning down a typical job [worth] two years of income versus 17 weeks of additional income, but you're also turning down the many additional valuable benefits of being employed.”

LARKSPUR, CALIFORNIA - APRIL 02: A customer walks by a now hiring sign at a BevMo store on April 02, 2021 in Larkspur, California. According to a report by the Bureau of Labor Statistics, the U.S. economy added 916,000 jobs in March and the unemployment rate dropped to 6 percent. Leisure and hospitality jobs led the way with 280,000 new jobs followed by restaurants with 176,000 jobs and construction with 110,000 new positions. (Photo by Justin Sullivan/Getty Images)
A customer walks by a now hiring sign at a BevMo store on April 02, 2021 in Larkspur, California. (Photo by Justin Sullivan/Getty Images)

‘Not likely to have an incentive effect to accept jobs’

The findings varied by state because each state offers different levels of jobless benefits. For instance, workers in Alabama, Georgia, Mississippi, Florida, and Tennessee — five of the 24 states canceling the federal programs in June — were the least likely to turn down a job because of the supplemental benefit, the study found.

“These are states in which cutting the supplemental income — because it had no disincentive effect to begin with — is not likely to have an incentive effect to accept jobs at a higher pace,” Petrosky-Nadeau said.

In states like North Dakota, Idaho, and Montana — which are also opting out of the federal programs — workers were the most likely to reject a job because of unemployment benefits compared with other states. Even then, the level of unemployment benefits in those states was still unlikely to discourage workers from employment, the study found.

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‘Bigger factors are health and safety concerns… child care concerns’

The analysis looked at the effect on job acceptance under the CARES Act, which provided $600 in weekly unemployment benefits through July of last year. In all states, the extra benefits weren’t enough to meaningfully alter whether a worker would accept a job or not. 

Workers are even less likely to have their job acceptance decisions affected by the current $300 weekly unemployment supplement, according to Petrosky-Nadeau.

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Accepting a job allows workers to move to the next position and maintain a professional network through their job, creating additional value to take a position rather than stay on unemployment.

“[For] the majority of people, the bigger factors are health and safety concerns… child care concerns,” Robert Valletta, author of the study and vice president at the Federal Reserve Bank of San Francisco, told Yahoo Money. “Those kinds of considerations appear to be much more important for people's decisions about whether they should return to work.”

‘Making these unemployment benefits no longer necessary’

Starting in mid- or late-June, jobless workers in 24 states will lose the extra $300 in weekly unemployment benefits, while contractors, gig workers, and others will lose access to the Pandemic Unemployment Assistance (PUA) program in 22 of those states, meaning they won’t get any benefits at all.

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Workers in those states stand to collectively lose $23.7 billion, averaging out to potentially thousands of dollars per worker, according to an analysis by the Century Foundation.

The move to cancel federal programs gained steam among Republican governors following April's disappointing jobs report, with Nebraska and Florida becoming the latest states to exit the $300 weekly bonus program.

"Transitioning away from this benefit will help meet the demands of small and large businesses who are ready to hire and expand their workforce,” Dane Eagle, secretary of the Florida Department of Economic Opportunity, said in a press release on Monday announcing the move.

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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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