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COMMUNITY IMPACTS OF UNEMPLOYMENT BENEFITS ENDING

Enhanced unemployment benefits came to an end on September 6. Here’s what we
know so far about the impact ending unemployment benefits will have on our
communities.

Published on Saturday, September 25, 2021 7:38 PM
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Expanded federal unemployment benefits ended on September 6, leaving 7.5 million
Americans without the income they relied on to ease the impact of unemployment
due to the COVID-19 pandemic. A further three million Americans had their
benefits cut by $300 a month, resulting in a total of nearly 11 million people
experiencing a sudden drop in income. Proponents say that ending unemployment
benefits will spur people to reenter the workforce, while opponents argue that
other factors have prevented people from returning to work, so ending benefits
will only cause needless suffering. Let’s look at what we know so far about the
community impacts of ending unemployment benefits. 


HALF OF STATES ENDED BENEFITS EARLY

We can get an idea of how communities are likely to be impacted by unemployment
benefits ending from looking at states that chose to end benefits early. The
country was roughly divided in half, with 26 states ending unemployment benefits
early in order to incentivize recipients to return to work. Data suggest this
action did not have the intended effect. Only one of every eight people whose
benefits were cut returned to the workforce. At the same time, spending was
dramatically reduced among former recipients, indicating they were experiencing
financial hardship. 


JOB GROWTH IS SLOWING

While proponents of ending enhanced unemployment benefits point to the declining
unemployment rate as a reason benefits are no longer necessary, overall job
growth is slowing. And job growth was higher in states that kept the enhanced
federal unemployment benefits. In fact, only 235,000 jobs were added during
August, nearly 500,000 short of the over 700,000 jobs economists predicted would
be added. 


MINORITIES AND WOMEN ARE DISPROPORTIONATELY IMPACTED

Approximately 40% of all unemployment insurance claims made during the pandemic
came from gig workers, caretakers, and self-employed workers who are not
ordinarily eligible for unemployment insurance. These workers are also more
likely to be minorities and women. Additionally, although overall unemployment
has decreased, the unemployment rate among minorities is significantly higher
than that of white workers. While the unemployment rate for white workers has
dropped to 4.8%, Hispanic workers face an unemployment rate of 6.6%, and among
Black workers, the unemployment rate is 8.1%. For Black women, that number is
even higher, at 8.6%. 




Factors Impacting Unemployment

Evidence so far has shown that ending unemployment benefits had little or no
impact on job growth or unemployment rates overall, suggesting that enhanced
unemployment benefits were not keeping people from returning to work. Instead,
experts point to concerns about rising numbers of COVID-19 cases linked to the
highly contagious Delta variant, lack of affordable childcare, and structural
inequities.


WHAT IS LIKELY TO HAPPEN?

Ending enhanced unemployment benefits has not led to a large number of people
returning to the workforce. Instead, it has led to a decrease in spending among
those affected. As a result, researchers predict the loss of unemployment
benefits will lead to an increase in poverty and an overall downturn in the
economy, as people can no longer afford to spend money in their communities. 




While many advocate making unemployment insurance more equitable and building
triggers into the unemployment insurance system to help it more rapidly and
smoothly adjust to changing economic factors, such policy changes will take
time. For now, our communities should prepare to the best of their abilities for
increased need and to target aid to the most vulnerable among their populations.


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