Study: States That Slashed Unemployment Benefits Saw $2 Billion Drop in Spending

Study: States That Slashed Unemployment Benefits Saw $2 Billion Drop in Spending

With this in mind—and even with the delivery of three stimulus payments to most Americans over the past year—studies and polls are suggesting that millions of Americans are still struggling to make ends meet amid the surge in new coronavirus cases due to the Delta variant.

 

States that decided to withdraw early from enhanced federal unemployment benefits witnessed slightly higher job growth—but it was also responsible for a $2 billion cut in overall household spending, according to a new study authored by economists and researchers at Columbia University, Harvard University, the University of Massachusetts-Amherst, and the University of Toronto.

Governors of the twenty-six states opted out of the unemployment program that tacked on $300 in weekly enhanced benefits several weeks before they were set to expire on Labor Day. The mostly Republican governors had long argued that the benefits kept some unemployed Americans from seeking work.

 

Spending Cut

According to the study, the states that ended the federal benefits early witnessed employment rise 4.4 percentage points compared to the states that continued with the benefits. However, that translated to just one in eight unemployed individuals in the “cutoff states” who eventually found employment.

More concerning, these same states also saw a twenty percent cut in weekly spending from residents—amounting to roughly $145 each week. As a result, the economies of the states that declined the benefits had to endure a reduction of nearly $2 billion in consumer spending from June through early August, the study noted.

Come Labor Day, a recent study conducted by the People’s Policy Project, citing data from the U.S. Census Bureau’s Household Pulse Survey, revealed that approximately ten million more Americans on unemployment will lose those benefits.

With this in mind—and even with the delivery of three stimulus payments to most Americans over the past year—studies and polls are suggesting that millions of Americans are still struggling to make ends meet amid the surge in new coronavirus cases due to the Delta variant.

Calls for Assistance

In recent weeks, both ordinary citizens and some lawmakers have been calling on the White House and Congress to quickly approve more financial assistance to Americans.

“For our team and other Americans who can claim unemployment, even the maximum payments will not be enough for most people to continue paying their bills—and avoid slipping into poverty,” contends one highly popular Change.org petition that has garnered more than 2.8 million signatures.

“The facts are, even successful small businesses can’t go months with their doors closed. But supplying Americans with monthly support until they can get back on their feet can save our communities from financial ruin,” it adds.

Moreover, twenty-one Democratic senators have signed off on a letter to President Joe Biden to take necessary action.

“While we are pleased that the American Rescue Plan included a one-time direct payment and an extension of federal unemployment insurance programs, a single direct payment will not last long for most families,” they wrote. “This crisis is far from over, and families deserve certainty that they can put food on the table and keep a roof over their heads.”

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters