American restaurateurs spent much of the spring complaining that they couldn’t hire enough staff because the workers were choose to stay home and collect unemployment benefits instead. So in May, more than two dozen states, all led by Republicans except one, announced that they would withdraw early from generous federal unemployment assistance programs that, among other things, added $ 300 a week to benefits. normal state. Meanwhile, a New York Times survey found that 52% of Americans think it’s time to cut back on the extra benefits.
All of this raised a number of questions. Some are only factual: Were business owners right in their complaints, or were they making a disproportionately small problem (and were they salty for having to pay their workers more)? Are companies hiring faster in states that prematurely cut benefits? Others are more moral judgments: is it really a bad thing if people can take their time to get back to work, even if they could find a job now?
We probably won’t have firm answers on the big factual mysteries for some time. But as more and more labor market data and surveys came in, we started to get a bit clearer picture of what was going on. This is mainly what many people would probably have guessed based on common sense: yes, some people definitely choose to continue to receive unemployment assistance instead of a job, but there are many other factors that also affect the labor market right now. , including the lingering impact of COVID.
For starters, hiring has certainly been a bit slower than economists would expect based on the number of job postings so far, even after the number of jobs improved in June. The internet is currently teeming with help seeking ads, and based on that volume, you would expect around 29-34% of the unemployed to find a job each month, according to Harvard economist Jason Furman. Instead, only around 24 percent are, leaving around a million people less employed.
We also know that at least some Americans take their time to return to work because they have UI to fall back on. How? ‘Or’ What? Because they said so. The online job site Indeed.com’s Hiring Lab recently surveyed 5,000 Americans to see if they were looking for work lately. Among the unemployed who were even interested in working, most said they were not looking urgently, with around a tenth of this group saying unemployment benefits were one of the reasons why. It wasn’t the only reason – fears of COVID and family care were higher – but it was a major reason.
Exactly how much have additional unemployment benefits slowed down hiring? The honest answer is we don’t know. A recent study by economists at the Federal Reserve Bank of San Francisco suggested that the additional benefit of $ 300 per week could reduce the rate at which Americans currently find jobs by 3.5 percentage points, or slightly more. of a quarter of the shortfall identified by Furman. But the reliability of these results is unclear, as they are based on an estimate of the impact of unemployment on the labor market in 2020, which the researchers only extrapolated forward.
It is also not clear whether the early elimination of benefits will cause Americans to return to work much more quickly. the unemployment numbers appear to be declining faster on average in states that have opted out of federal unemployment programs early, as the Wall Street Journal recently noted. But if you look closely at the numbers, the picture becomes more complicated. Of the 10 states where continued claims for regular UI benefits have fallen the most rapidly since late April, only five have chosen to end the additional $ 300-per-week cap ahead of schedule, suggesting all the less that there are other important factors. determine how quickly states are recovering.
So the super-luxury federal unemployment programs are likely slowing the rate at which people return to work, although how much is still an open question. In a year or so I’m sure an economist will have semi-precise estimates of how this affected things, in which case the whole argument will be largely academic.
Even though I have just devoted most of an article to this, the somewhat obscure technical debate over exactly how far UI has prevented people from taking a job is perhaps a little less important. ultimately the ethical debate about whether we should care. Clearly, business owners who have struggled during the pandemic are frustrated, and some of them may lose the necessary income because they cannot fully equip themselves. The federal government is likely backing some people who could easily find a job at this point, which, as the Times poll shows, clearly rubs many voters the wrong way. But in the grand scheme of a pandemic response, these problems hardly qualify as disasters. Meanwhile, the UI system still clearly benefits large numbers of working-class Americans, by easing the financial burden on parents who must always stay at home with their children and giving the unemployed time to spare. and flexibility to find a new job that suits them. And to the extent that unemployment benefits have made hiring a little more difficult for companies, they have also given workers leverage to secure much-needed increases, especially in the hospitality industry, where wages have increased. There are obviously ghouls out there who are crazy that their bowl of burrito is about to cost 4 cents more as a result. But personally, I just can’t get upset about it.