Unemployment Programs Provided Vital Support to Workers and the Economy During Pandemic

I wish I could put the entire article up; but then you would probably not read it. I did quite a bit of editing to get this article to the point of establishing what the Gov did during the pandemic concerning unemployment. Much of which was done during Joe Biden’s presidency. Besides showing the first two charts which establishes my point, I have added links to two other graphs. We are very fortunate to have the federal government step into the crisis as led by a president who cared at the time.

“Historic Unemployment Programs Provided Vital Support to Workers and the Economy During Pandemic, Offer Roadmap for Future Reform,” Center on Budget and Policy Priorities

In March and April of 2020, the economy contracted in conjunction with the spread of COVID-19, costing the nation 22 million jobs. Companies closed and there was little work to be had for most of Labor. Many forecasters projected a difficult recovery of which was including the Congressional Budget Office (CBO). The CBO estimated in May 2020 unemployment would remain a stubbornly high 8.6 percent through the fourth quarter of 2021.

Responding to this rapid job loss, Congress passed the most expansive set of temporary unemployment benefits in our nation’s history. These steps were necessary largely because the permanent unemployment insurance (UI) system does not cover many unemployed workers and often provides inadequate benefits.

Temporary pandemic unemployment programs significantly increased the coverage, duration, and adequacy of unemployment benefits compared to regular UI, substantially reducing hardship and providing important stabilization and impetus for recovery for a sharply declining economy. Without these measures?

An ~5 million more people would have had annual income below the poverty line in 2020 and potentially 6 million more in 2021. Additional millions would have had less money for food, shelter, and other necessities for their families. The jobs rebound that far surpassed initial projections would have lost steam. Tens of millions of workers not covered by regular UI (especially workers of color) would not have received any benefits. Up to 27,000 more people may have died from COVID-19 in its early months because they needed to work in higher-risk occupations to make ends meet. These enormously beneficial outcomes came without the pandemic unemployment benefits holding back employment growth, despite rhetoric to the contrary.

The Primary Pandemic Unemployment Programs

President Trump’s CARES Act on March 27, 2020 established the primary pandemic unemployment benefit programs. Policymakers extended and modified them through several subsequent measures. The American Rescue Plan was signed by President Biden on March 11, 2021. These programs expired on September 3, 2021. Half of the states ended them sooner in June or July 2021. The programs provided the following federally funded benefits:

• Federal Pandemic Unemployment Compensation (FPUC) supplemented weekly UI benefits by $600 until the program temporarily expired on July 25, 2020. Policymakers reestablished it as a $300 weekly supplement for the period of December 26, 2020 to September 3, 2021. (A separate program, Lost Wages Assistance, provided a $300 supplement to individuals during part of the period between the two forms of FPUC coverage.)

• Pandemic Unemployment Assistance (PUA) provided benefits to individuals who were unemployed due to a specific pandemic-related reason and not otherwise eligible for regular, state-provided UI benefits. Workers covered by PUA included those with low-wage, part-time, and shorter work histories, self-employed workers, and independent contractors (including so-called gig workers).

• Pandemic Emergency Unemployment Compensation (PEUC) provided additional weeks of benefits to workers who exhausted their regular state-provided UI benefits. Before it expired, the program ultimately allowed a total of 49 weeks of additional benefits.

The government provided over $650 billion in federal pandemic unemployment benefits between March 2020 and September 2021.

Reduction in Hardship

As many as 46 million individuals received unemployment payments in 2020. This represents 1 out of every 4 workers, according to a Century Foundation analysis. Without this critical support, the hardship that jobless workers and their families suffered would have been substantially greater.

The Census Bureau: without family unemployment benefits, 4.7 million more people, including 1.4 million children, would have been below the poverty line in 2020 (under the official poverty measure). The poverty reduction was notable for all racial groups but particularly so for Black individuals: a decline of 2.5 percentage points, compared with 1.4 percentage points for the population overall.

A more comprehensive federal measure of poverty, known as the Supplemental Poverty Measure (SPM), showed that benefits for jobless workers had an even greater impact on reducing impoverishment, lifting 5.5 million people out of poverty in 2020. While official and SPM poverty numbers are not yet available for 2021, the Department of Health and Human Services’ Office of the Assistant Secretary for Planning and Evaluation estimates that federal and state unemployment payments kept 6 million people out of poverty last year.

Unemployment benefits helped millions afford basic needs. People who received unemployment benefits were less likely to experience food hardship (18.9 percent) than peers who applied for benefits but did not receive them (29.1 percent), according to researchers at the Bureau of Labor Statistics (BLS). (See Figure 1.) Unemployment benefits also helped individuals stay up to date on their rent or mortgage payments, and beneficiaries had fewer symptoms of anxiety and depression, the BLS researchers found.

FPUC benefits helped to substantially mitigate a reduction in health care spending by individuals and families (e.g., paying for doctor visits), due to the income they lost from higher unemployment during the pandemic.

The financial security that unemployment benefits provided enabled some workers to avoid COVID-19 infection in contact-intensive jobs, especially in the service industry. These workers face a higher probability of infection because they cannot work remotely and often need to interact directly with customers and other workers. Using a model that accounts for infection risk and labor market dynamics, researchers at the Federal Reserve Bank of Atlanta estimated that pandemic unemployment benefits, especially FPUC and PUA, reduced cumulative pandemic-driven deaths by nearly 5 percent, or about 27,000 lives, from April to December 2020.

Stabilizing the Economy

UI benefits play an important role as a timely and effective economic stabilizer by supporting consumer demand during economic downturns, considerable research shows. For example, researchers from the Harvard Business School and the University of California at Berkeley found that “where unemployment benefits are more generous, the local economy tends to react significantly less sharply to negative shocks.”

When large segments of the economy were temporarily shuttered to prevent the spread of COVID-19, pandemic unemployment benefits helped the economy stabilize and then recover from one of the most rapid and steep job declines in U.S. history. Assessing this impact, a report by the Federal Reserve Bank of Dallas suggested that unemployment payments “threw a lifeline to an economy in freefall as the pandemic struck.” A JPMorgan Chase analysis highlighted the significant difference in spending during the pandemic between unemployed individuals receiving benefits and those who experienced a delay in receiving them, concluding, “UI has not only helped unemployed households to smooth consumption but also helped to stabilize aggregate demand.” In September 2020, CBO estimated that the pandemic unemployment programs would raise gross domestic product (GDP) by 1.1 percent that year by providing resources to people who had suffered a significant loss in earned income.

In short, along with other relief efforts, pandemic jobless benefits helped the economy recover from an unprecedented shock that all but eliminated a decade’s worth of jobs gains in just two months. So far, unemployment today is significantly lower than what CBO projected in May 2020. (See Figure 2.)

The issue generating most of the scrutiny related to the pandemic unemployment programs was the potential impact on employment. Some of the doubters claim unemployment benefits reduce the efforts of jobless people to search for work Recent research finds unemployment benefits enables Labor to find jobs better suited to their skills. Also, UI benefits generally require people to look for work and therefore prevent workers from dropping out of the labor force. It is not a free ride and State Unemployment Department check on the unemployed to see if they are looking for work.

As shown in Figure 2, the actual rate of unemployment was less than a projected rate of unemployment. The ending of the Unemployment program benefits did not have an impact on job growth, as show in Figure 4 (not displayed) in the article. Finally, one can see in Figure 3 that >75% of the unemployment claims were covered by Federal Unemployment Insurance and not states.