When Enhanced COVID Unemployment Benefits' End - What Will it Do to the Job Market

At the start of the coronavirus pandemic, earlier in 2020, millions of American workers lost their jobs. Then, in March, Congress noticed and decided that the 26 weeks of unemployment coverage was not enough for the employment crisis that was likely to extend beyond six months. So, the government provided an additional 13 weeks of benefits (under an emergency unemployment compensation program) to those who lost their jobs due to the pandemic.

An additional $300 per week has been provided by the US government, since March, to help the unemployed cope with the economic impact due to the pandemic. These additional benefits will be expiring in September, raising questions about whether this will address labor shortages that are affecting parts of the economy and much of the country.

Will the end of the enhanced unemployment program force people to go back to work?

History of the COVID Unemployment Benefits Program

When people have the resources to meet their basic needs when they are out of work, they can take the time to find the right job for themselves instead of taking the first job opportunity that comes in front.

The approach had a win-win for both parties, i.e., employees and employers. Employees benefit because they find jobs that pay more and meet their needs. And companies benefit because they recruit workers with the right skills for the job.

With certainty, it is difficult to say what effect the increased benefits have on the labor market once the unemployment program ends. But the labor market is likely to reach a point where the $300 weekly supplement has a negative impact.

Unemployment benefits typically replace about half of an employee's pre-retrenchment wages. Congress raised $600 weekly in aid during the early days of the COVID pandemic. Legislators also gave money to groups such as the long-term unemployed and the self-employed and gig workers who are usually ineligible for state benefits.

They've since halved the weekly subsidy — $300 a week — and made federal benefits available till Labor Day (Sept. 06). The extra $300 pays about 42% of recipients as much or more than their previous salary.

Labor force participation has remained flat even though the number of job openings surged in April. However, economists pointed out some other reasons instead of referring to the negative effects of unemployment aid. One of the indicated reasons is that people want to stay indoors due to health concerns.?

But the question is, will terminating the benefits program bring the laborers out of their burrows?

Will Benefits Program Termination End the Labor Crisis?

Twenty five of the states opted to end the increased benefits earlier this summer, stating that they're a significant cause of the labor crisis.?

Gusto, a payroll and HR services provider, examined data from its platform to help answer whether eliminating these benefits provides a hiring boost. States that closed the increased provisions early have seen an increase in the employment of adult workers (aged 25 and above). The changes appeared in the week when governors announced that unemployment insurance would soon end. This trend was mainly seen in the states – Alaska, Iowa, New Hampshire, North Dakota, West Virginia, and Wyoming – having the highest vaccination rates.

Notably, health concerns have a significant role in driving adult's labor supply decisions compared to unemployment benefits.

In states where better unemployment insurance won't end until September, there has been a significant simultaneous increase in the hiring of 15 to 19-year-olds.

Another considerable fact is that health concerns are holding back older adults from returning to work. The frequent disruptions to childcare and education systems are also its companions.

Axios?recently?published a poll from Morning Consult?which asked 463 U.S. adults who are receiving unemployment insurance why they have turned down job offers while they’ve been unemployed. And the idea that people are receiving more money to stay home than they would be working is not the top answer. It’s part of a larger survey by Morning Consult of 5,000 U.S. adults, of which 463?answered that they were receiving unemployment.

When asked “Reasons for turning down job offers while unemployed:

• 13.8 percent of those asked answered, “child care obligations.”
• 13 percent: “COVID-19, or any combination of reasons associated with the pandemic
• 13% “I receive enough money from unemployment insurance without having to work”
• 13% “Health/Medical limitations.”
• 12.1% “I was not given enough money to return to work”

Therefore, ending the unemployment program straight away is not necessarily the "magic bullet" to accelerate economic recovery, but it may help. it will be a factor in a person's decision-making process to return to work.

?Open Dialog Not Politics will Get the Country Working Again?

?States, as well as legislators and employers, must focus on ways to encourage, not force, those who have not been vaccinated to do so. With FDA approval around the corner, that should help. The key is, try to keep from mandating and forcing but educating and guiding where possible.?This will definitely make for better outcomes.?

?To help those who have children and trying to get back to work, local communities must come together to work with their local school boards, to have a solid dialog and come to a reasonable agreement about how to open schools along with childcare centers safely this fall. Emphasis on reasonable.??

The country as well as the world has been through a lot in a short period of time. We have created a lot of fear that did not serve the country well.?People are scared and concerned about their future, their health and their safety. It comes from all kinds of different perspectives. We want to get people back to work, it is going to be more than just money solving that problem. It has to be coming together, open minds and open hearts, listening and understanding each other’s concerns.?This needs to be done specifically at the state and local levels. Employers have the opportunity to be at the forefront of this to help make that happen, right there at their place of business.??