Steep Cuts In Unemployment Benefits Made People Much Poorer, But Didn’t Increase Job Rates At All

  • A new study shows that cuts in unemployment benefits didn’t do much but devastate poor people’s incomes.
  • Individuals subject to benefit cuts had only slightly higher employment rates than those who were not, but ended up with massively lower incomes.
  • Only 26 states have implemented steep benefit cuts but the pandemic UI benefits will expire in all states on September 6 unless Congress acts.

Matt Bruenig from Jacobin writes:

“The media breathlessly reported on labor shortages this summer, helping generate support for unemployment benefit cuts. But a new study shows such cuts didn’t do much but devastate poor people’s incomes.

Six academics, including Arin Dube and Suresh Naidu, released a paper last week estimating the impact of the massive unemployment benefit cuts that occurred in twenty-two states in June. The team was able to use bank transaction data and comparisons to unemployment benefit recipients in states that did not cut benefits to get precise estimates of both the employment and income effects of the policy change.

Overall, individuals subject to benefit cuts had only slightly higher employment rates than individuals who were not subject to cuts but had massively lower incomes.

The researchers focused on a cohort of UI recipients who were receiving benefits in April of this year. They found that states that cut unemployment benefits (Withdrawal States) saw a 46 percent reduction in benefit recipiency among this group relative to states that did not cut those benefits (Retain States).

From there, they looked to see how employment differed between the Withdrawal State cohort and Retain State cohort over this period. What they found is that, 21.5 percent of people in the Retain State cohort got employment over this period. In the Withdrawal State cohort, it was only slightly higher at 24.9 percent…”

See full story here.



Categories: Business, Government, Labor, Politics

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