It turns out that people are willing to work even when generous unemployment benefits are on the table.
Saul Loeb / Getty Images
Republicans in Congress have a simple excuse why they don’t want to extend the federal unemployment benefits of $ 600 per week that are slated to expire in late July: The money, they say, will deter Americans from going back to work and slowing down. the reopening of the country, since companies will not be able to hire staff again.
On a moral level, this position is petty at best, as it implies that we should compel low-wage service workers to return to work and risk lung death in the midst of a pandemic that is currently exploding. out of control around the world. Full Sun Belt for them to rent. From a macroeconomic perspective, the argument is also uncertain, as turning off aid would harm consumer spending and could put millions of jobs at risk. (I mean, if you want people to go to the Gallery to buy, they need money. That’s science.)
And to top it off, it’s not even clear that the super-luxurious unemployment insurance scheme that Congress created in March is making it much more difficult for companies to hire right now.
(Standard disclosure: I am in conflict with wazoo on this issue, as Slate is participating in state job-sharing programs, which would allow its employees to receive federal unemployment benefits while working reduced hours.)
Admittedly, many Americans are raising more unemployment money now than they earned while working, thanks to the $ 600 federal benefit that Congress put into the CARES Act. In theory, that cash could be a powerful disincentive to getting back to work (why go back to routine when it can make you stay more at home with your family?) And, in fact, the Congressional Budget Office predicted that Payments would depress employment in 2021.
But when they have analyzed the data so far, economists have found little evidence that unemployment payments are having a major impact on the labor market. If they were, I would expect hiring to be faster now in states where the benefits are slimmer compared to what people earn working. It is not obvious that this is the case. Ernie Tedeschi of Evercore ISI, Twitter’s favorite source of quick macro analysis, found that between April and May unemployment fell slightly faster in states where unemployment is less generous compared to typical salary, but the difference was not statistically significant. In a much more formal draft recently released at the Brookings Institution, a group of economists found that there were fewer layoffs and that rehire actually seemed to go faster in states where benefits were relatively more generous. Similarly, they found that in small businesses, employee hours collapsed even more and were slower to recover in states where unemployment benefits replace a lesser share of the typical wage. “This is the opposite of the pattern one would expect if either of the two were significantly driven by labor supply responses to UI generosity,” the document said.
Replacement rates refer to the portion of the old earnings of unemployment beneficiaries covered by their unemployment benefits.
Bartik, Bertrand, Lin, Rothstein, Unrath, 2020
Why wouldn’t unemployment benefits affect hiring much, when it seems logical that they do? The most obvious explanation is that, at the moment, labor supply is not really a problem for the economy; the labor demand is. Companies are hiring slowly, because the coronavirus is still sweeping the country and they can only partially reopen.
These findings are not definitive. You can certainly find anecdotal examples where the super-luxurious user interface makes life difficult for companies; On Friday, for example, the New York Times reported on how some local merchants find it difficult to hire seasonal workers in Rehoboth Beach, Delaware. But in the end, there is no good empirical evidence that unemployment benefits are a big hurdle to rehiring right now, and for every saltwater candy store owner who says he can’t find enough staff, it seems like There are plenty of everyday examples of employees who have returned to their old jobs even though this meant a cut in pay. Some may feel forced: Workers risk losing their benefits if they reject a job offer. Others do it by choice: As a Delaware restaurant server told the Times, “I’m a go, go, go personality.”
What this means is that the argument against extending the CARES Act unemployment benefits is extremely weak. They are obviously not hurting rehire in the states that are reopening. More importantly, it seems very obvious at this point that the economy will not return to normal, and there will be no jobs for everyone who wants one, until the virus has been contained. Even states like Florida and Texas that were eager to reopen are forced to reverse course now that infections have increased. Instead of worrying about whether people want to go back to work, we should be worrying about taking care of people who just can’t.
