Federal unemployment insurance benefit slowed employment growth

From: Badger Institute 

“Unemployment rate fell faster in 22 states that eliminated supplemental benefits early.”

   Shortly after the advent of the COVID-19 pandemic, Congress passed the CARES Act, a $2.2 trillion bill designed to alleviate the negative economic consequences of government-mandated shutdowns. Included in the bill was a $600 weekly federal unemployment bonus payment on top of the state benefits that unemployed workers already could receive.

Since the combined federal/state unemployment insurance benefit was greater than the weekly wages of many employees, some economists worried that it might depress employment growth. We decided to examine whether the federal bonus payments served as a disincentive to workers returning to jobs once the economy rebounded.

During the throes of the crisis, when many restaurants, retail establishments and other businesses were closed, the boost helped people weather job losses. But to prevent the supplemental benefits from discouraging a return to the workforce, lawmakers set them to expire after six months.

That changed in August 2020 when the Trump administration, via executive order, extended the benefit at half of the original $600 rate. The American Rescue Plan, which passed in March 2021, extended this $300 weekly benefit until Sept. 6, 2021 — although states had the discretion to end it earlier, and many did.

Wisconsin, under Gov. Tony Evers, continued paying the federal benefit as long as possible, right up through early September.

The fact that the U.S. economy has been plagued with unfilled jobs in the past six months as the shutdowns were lifted Read more.