Expanded unemployment benefits kept millions of Americans from returning to work even as employers were desperate to hire workers, according to a new study.
The onset of the COVID-19 pandemic in 2020 was greeted with lockdowns and business closures. The new study, by the Texas Public Policy Foundation this month, notes that increased unemployment benefits were approved early in the pandemic, and again in 2021 as the economy began to slowly revive.
The study notes that the 2021 extensions proved particularly problematic, because the higher payments ended in September, keeping many people out of the labor market in the summer of 2021, when employers were desperate to hire workers.
“The effect was to incentivize people not to work, resulting in increased unemployment, greatly hampering the labor market by contributing to an artificial shortage of labor,” the report said.
Noting that some states, mostly led by Republicans, ended the extra payments before the scheduled end of the extra cash, the report said there is a clear difference between the states that ended the payments and those that did not.
“Those states that ended the program early experienced substantially faster job growth in terms of how quickly they approached pre-pandemic employment levels,” the report said.
The report’s bottom line was that whatever its motives, the public policy experiment should not be repeated.
“The state governments that ended the gravy train of enhanced unemployment benefits early in their states made the right decision and gained economic freedom and greater opportunity for their constituents.”