Unemployment benefits cut by more than 300,000 in a pandemic: study

Outdoor dining tents under construction in Arlington, Virginia on February 5, 2021.

Liu Jie / Xinhua via Getty

More than 300,000 Americans lost unemployment benefits prematurely during the Covid pandemic, according to a study published Tuesday by the California Policy Lab.

This is because many states consider unemployed workers, which underestimated the severity of the recession, the analysis says.

State unemployment systems have an automatic mechanism that provides additional help to the long-term unemployed during periods of mass unemployment.

These extended benefit programs can provide up to 20 additional weeks of assistance in addition to the typical six months of regular government benefits.

“Defects discovered”

However, a flawed design has resulted in 33 states halting their extended benefit programs since the fall of 2020, despite long-term unemployment continuing to rise, according to the report.

According to a conservative estimate in the analysis, almost 315,000 people lost benefits as a result.

“The pandemic has uncovered flaws in the interpretation of these triggers, which in many states have resulted in automatic assistance being discontinued when their workers have been unemployed for increasing periods,” said Alex Bell, Thomas Hedin, Geoffrey Schnorr and Till von Wachter. who co-authored the report.

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The states automatically pay an extended allowance based on the “insured unemployment rate”. (Some states use an alternative measure.)

The IUR is the proportion of a state’s workforce who receive unemployment benefits. It is different from a state’s unemployment rate.

Most states offer extended benefits when the insured unemployment rate exceeds 5%. All states except South Dakota paid for these benefits at some point during the pandemic.

Insured unemployment rate

However, the insured unemployment rate only counts for Americans who receive regular state unemployment insurance.

Long-term unemployed people who receive assistance through extensions, such as the Extended Benefits program or federal programs created by the CARES Act, are not considered. That is, it could “overestimate improvements in labor market conditions,” wrote the co-authors.

As a result, insured unemployment rates in many countries have fallen below the 5% threshold, ending extended benefits in these areas.

In states like Alabama, Maryland, Minnesota, Ohio, South Carolina, and Virginia, a large proportion of people (about 20% to 30% of all unemployment benefit workers) lost aid after the programs ended, according to the California Policy Lab.

According to the US Department of Labor, only 16 states were paying these benefits as of March 27.

However, terminating extended assistance in this way is not intuitive in times of high long-term unemployment, the report said.

According to the Bureau of Labor Statistics, around one in four unemployed people had been unemployed for at least a year in March.

“While several unique aspects of the Covid-19 crisis have exacerbated the problem – including high long-term unemployment rates, a higher propensity for the unemployed to receive benefits, and high use of extended benefit programs – this design problem hinders the UI program’s ability to respond to any severe downturn, “they wrote.

Some who were offered extended benefits may have since been able to raise aid through temporary federal programs. The American rescue plan extended aid through Labor Day.

Michigan officials who ended their enhanced benefits program on Saturday said this was likely the case with residents.

Fortunately, with the federal expansions introduced on March 27, applicants who have participated in the extended benefit program will most likely be able to receive benefits through other federal programs such as pandemic unemployment compensation or pandemic unemployment assistance, “said Liza Estlund Olson. acting director of the Michigan Unemployment Insurance Agency said.

Around 613,000 of the around 17 million people who receive unemployment benefits did so at the end of March through extended benefits, according to the Ministry of Labor.

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