It will take some time to be completely sure of the effect of cutting off the additional money the unemployed were receiving during the pandemic.
But odds are it’s been beneficial, if the measuring stick is based on enticing the unemployed to rejoin the workforce.
Anecdotally, there was plenty of evidence that the federal largesse — adding $300 per week on top of state benefits as well as extending coverage to some categories of workers who previously did not qualify — was a mixed bag. While it helped the unemployed weather one of the worst economic crashes in our nation’s history, it also diminished their incentive to go back to work as long as the additional benefit lasted. Particularly for those in lower-paying service jobs, they could earn more by not working than working. It would take unique individuals to not ride that situation for as long as they could, especially if they worried their jobs placed them at higher risk of contracting COVID-19.
As a result, once the virus-inspired shutdowns ended and the economic recovery began, businesses of all types found themselves in a labor crunch. They couldn’t get back to full employment, even if they wanted to, because they couldn’t entice all of their former workers to come back, nor could they line up enough replacements. The situation put upward pressure on wages, as companies found themselves competing for workers not only with other companies but with the government unemployment subsidies.
The situation was bad for employers. It might have been bad for the workers, too.
That’s what Tarren Bragdon of the Foundation for Government Accountability argues. “Research shows that people who are unemployed for more than six months make up to 15% less income than they did in their previous job once they reenter the workforce as they fall behind their cohorts in both skill and experience,” Bragdon writes.
Mississippi and two dozen other states opted to cancel the extra $300 federal payment early, but they did so mostly out of concern for businesses located within their borders, not because of any paternalistic sentiments toward workers.
According to Bragdon, these opt-out states are already showing that it was the right decision by economic measurements. They have been posting lower jobless rates and fewer jobless claims than those states that continued the extra unemployment benefit through its expiration this past Monday.
An improved job picture should also mean healthier economies, which is a plus for workers, too. Strong economies produce greater job stability, higher wages and more opportunities for advancement.
During an economic crash, extra government handouts for those of sound mind and body might be a necessity. The quicker, however, that individuals earn their money from their own labor, the better off they will be.
