On Labor Day, a New Reality for the Unemployed

 Francis Scialabba

One of the largest—and certainly the most divisive—of all the pandemic-era relief programs ends today. Almost 3 million people will lose their extra $300/week in benefits provided by the federal government. 25 states had already wound down the program over the summer, arguing it was keeping potential workers on the sidelines and fueling a historic labor shortage. The backstory: In March 2020, as the US was shedding almost 1 million jobs per day, Congress authorized an extra $600/week in unemployment benefits on top of what states offered to keep jobless Americans afloat (the $600/week was later reduced to $300 in August 2020). Around the same time, the government also expanded the number of workers eligible for unemployment insurance (UI) by including people like gig workers and the self-employed. That program, which comprised 40% of all UI claims during the pandemic, also expires today.  In all, the US government has spent $680 billion on unemployment benefits since last March, the second-highest amount among Covid stimulus programs behind only the Paycheck Protection Program ($835 billion). It’s split the US more than Laurel and Yanny Critics of letting the extra benefits expire say it’s too early to rip out support for millions of Americans who are still without work because of the pandemic, especially as the Delta variant thwacks the labor market. The economy added only 235,000 jobs in August, much lower than expectations. But many Republicans and business leaders say letting the extra benefits expire is long overdue. They’ve argued that the additional money disincentives people to look for work and has created an impossible situation for businesses desperate to hire. While it’s still early to fully analyze the effects of the enhanced benefits on the labor market, preliminary studies show that removing extra UI has a modest, if any, impact on job growth. Economists point to other factors, such as health concerns over Covid and a lack of childcare options, as more meaningful drivers of the worker shortage.  Looking ahead...the expiration of the unemployment programs could lead to $8 billion in reduced consumer spending in September and October, UMass economist Arindrajit Dube estimates.