Hear Us: The Devastating Cost of Cutting Unemployment Benefits

Hear Us: The Devastating Cost of Cutting Unemployment Benefits

Mom struggling to do laundry with baby.

(Photo: SolStock/iStockPhoto).

In an economy where the Black unemployment rate is still nearly double that of white workers, and in which we still have 7.6 million jobs to go before we reach pre-pandemic employment, cutting off unemployment benefits is tantamount to taking a knife to an inflatable life raft and leaving people to drown. And when people go down, so does the health of our economy writ large.

Despite its expansive effectiveness, the tide seems to be turning against unemployment insurance (UI). Republican governors in 25 states have announced that they will cut off supplementary unemployment benefits that were put in place as a result of the pandemic. And in early June, President Biden suggested that his administration was comfortable with ending the supplementary benefits when they expire in September, despite millions still being out of work.

UI benefits have been an essential support for millions of workers and families throughout the pandemic. The emergency boosts to UI during the pandemic — $600 a week until July 31st of last year, and now $300 — have been especially critical since standard UI benefits in many states only cover a fraction of a worker’s lost wages.

Now, as our labor market slowly restarts, these benefits are increasing worker bargaining power by giving workers the power to say no to jobs that don’t pay enough, have unpredictable schedules, or are unsafe.

Despite these realities, conservatives are once again resurfacing false narratives that these benefits disincentivize work, so they can justify cutting off UI benefits early. Even after the $600 emergency boost to UI expired in July 2020, research finds that the labor market didn’t see a big bump in employment — something we might have expected if UI benefits were the thing holding people back from work. Some of the largest job growth we’ve seen in recent months has actually been in lower-wage sectors that employ workers that would get the largest boost from UI as a share of their wages.

These false narratives are especially pernicious because they offer so-called “economic” cover to ideas about who deserves help and support. People who have historically been on the margins of the economy — Black and Latinx communities, and especially women — are those who benefit the most from programs like UI. Workers of color have experienced larger job losses and less hiring than white workers since the beginning of the pandemic and they are disproportionately experiencing unemployment. How our society decides who is deserving and how we define work are rooted in racism and sexism. So let’s be clear-eyed about who exactly is most harmed by cutting unemployment benefits.

Ultimately, conceding to these false narratives and cutting back on these crucial benefits harms all of us. A new Joint Economic Committee (JEC) report finds that “every $1 in UI generates $1.61 in local spending. Based on this multiplier, localities around the country will miss out on more than $12 billion flowing back into their economies.” These estimates are likely an understatement, because they don’t take into account the early cancellation of the Pandemic Unemployment Assistance (PUA) program and the Pandemic Emergency Unemployment Compensation (PEUC). Research shows that states with more generous unemployment insurance at the beginning of the pandemic experienced milder labor market declines and had faster economic rebounds. After all, economic security brings important spillover effects: people are more likely to spend money at local businesses or make a big purchase they’ve been putting off.

Punishing workers for not going back to work — whether because they don’t feel safe, or because they still bear the burden of care responsibilities, or because the jobs on offer don’t pay enough to make a return to work worth it — ultimately harms our collective economic health.

Rather than blame workers, we need to build an economy that appreciates the complicated and intersecting nature of people’s lives and decisions, especially those who are most structurally marginalized. Only then will we start to build towards a truly healthy and equitable economy that leaves no one behind.

Rakeen Mabud is the managing director of policy and research and the chief economist at the Groundwork Collaborative.

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Tags: jobseconomic justiceunemploymenteconomic equityhear us

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