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Cutting unemployment benefits won’t bring back workers — but will hurt millions of families, new research finds

A total of around 3.5 million workers will lose supplemental funding.

FILE - San Antonians react to Abbott opting out of federal supplemental unemployment program
FILE - San Antonians react to Abbott opting out of federal supplemental unemployment program

A push to decrease financial support for the unemployed could cause millions of Americans to lose their jobless benefits, a new report finds.

In the wake of a disappointing April jobs report, which showed that a mere 266,000 new jobs were created, even with a record high 8.1 million job openings in the economy, 22 states — all with Republican governors — have announced plans to wind down supplemental $300 weekly unemployment benefit payments ahead of the program’s scheduled end in September, according to NBC News reporting.

An analysis released this week from Oxford Economics paints a grim picture about the results of those actions: A total of around 3.5 million workers will lose that supplemental funding. Since most of those states also plan to discontinue other pandemic-triggered expanded unemployment programs for gig workers and those who had exhausted regular state benefits, roughly 2.5 million would lose access to unemployment payments entirely. The impact would be on the order of $8 billion a month for the remaining duration of the benefit expansion.

Governors curtailing these programs before the scheduled Sept. 6 expiration date have said they are doing so because businesses in their states are struggling to find workers. Labor economists reject this line of thinking, disputing the idea that roughly $1,200 a month is enough inducement to keep people home in the face of ongoing health and caregiving hurdles.

“Yes, it has some marginal impacts, but people think that child care responsibilities and Covid hesitation are a bigger effect,” said Jeff Strohl, director of research at the Georgetown University Center on Education and the Workforce.

Andrew Stettner, senior fellow at The Century Foundation, said the combination of intermittently open schools and day care facilities has made it harder not only for parents to plan a return to the workforce, but to embark on the search for a new job in the first place.

“Capacity for child care has been reduced, and people are still getting used to their new reality,” he said.

Contrary to lawmakers’ assertions, a growing body of research has found unemployment benefits have little to no impact on people’s motivation to seek work.

One widely cited study conducted by the Federal Reserve Bank of Chicago last summer found that, rather than disincentivizing jobless workers, unemployment benefits prompted them to job-hunt even harder. “Those currently receiving UI benefits search intensely for new work, and their effort appears to be somewhat greater than that of the unemployed not receiving benefits,” the researchers wrote.

A February study from the University of Chicago found that not only did more generous jobless benefits not curb people’s propensity to seek jobs, it also generated among those households an unexpected increase in spending. “These spending and job finding facts suggest that benefit expansions during the pandemic were a more effective policy than predicted by standard structural models,” the study’s authors wrote.

But with a cut in unemployment benefits, Stettner predicted that these states’ economic activity will fall. “It’s going to slow down the recovery, especially in some of the harder-hit areas with high unemployment rates — that’s where it’s going to hurt the most. These benefits have been really important,” he said.

The unique nature of pandemic-triggered job losses have made it more difficult to measure as well as predict how the jobs recovery will continue to unfold. “We’re not talking about a traditional skills gap,” Strohl said. “There’s still tremendous churn going on. “We’re talking about a labor shortage, but not a skills gap,” he said.

Stettner suggested that wages and working conditions could be contributing to less-skilled workers’ reluctance to accept certain types of work. “The problem is the quality of the jobs that are becoming available — that often happens early in a recovery,” he said. “We’re obviously at an inflection point — a lot of people are hiring at the same time.”

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