Daily Column – 6th September 2021

One of the greatest — and probably the most contentious — pandemic-era humanitarian projects comes to a close today.

Almost 3 million individuals would lose their federal government-provided additional $300 per week in subsidies. Over the summer, 25 states shut down the programme, claiming it was keeping prospective hires off the job market and contributing to a record labour shortage.

What had happened: In March 2020, when the United States was losing almost 1 million jobs per day, Congress allowed an additional unemployment benefit of $600/ week on top of what states were providing to keep jobless Americans afloat (the $600/week was subsequently lowered to $300 in August 2020).

At the same time, the government increased the number of workers  eligible for registration of unemployment insurance (UI) by including gig workers and self-employed persons. This programme, which accounted for 40% of all UI claims during the epidemic, is likewise coming to an end today.

Since last March, the US government has spent over half a Trillion in unemployment compensation, second only to the Paycheck Protection Program ($835 billion) of Covid stimulus initiatives.

It has caused more division in the United States than Laurel and Hardy.

Critics of letting the additional benefits expire argue that it’s too soon to abandon millions of American citizens who are still unemployed as a result of the epidemic, particularly if the Delta strain wreaks havoc on the job market. In August, the economy added only 235 K jobs, much below projections.

Many business leaders and Republicans, on the other hand, believe that allowing the additional benefits to expire is long overdue. They claim that the extra money makes it difficult for people to seek for job and creates an untenable scenario for firms that need to hire.

While it’s too soon to assess the entire impact of the expanded benefits on the labour market, preliminary research suggests that eliminating additional UI has a minor, if any, influence on employment creation. Other issues, such as health worries about Covid and an absence of childcare choices, are cited by economists as more significant causes of the labour shortage.

According to UMass economist Arindrajit Dube, the expiry of the jobless programmes might result in $8 billion in lower consumer expenditure in September and October.

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