Outdoor tents under construction in Arlington, Virginia, on February 5, 2021.
Liu Jie / Xinhua via Getty
More than 300,000 Americans lost premature unemployment benefits during the Covid pandemic, according to a study published Tuesday by the California Policy Lab.
This is due to the way many countries account for unemployed workers, who underestimated the seriousness of the recession, the analysis reads.
State unemployment systems have an automated mechanism that pays long-term unemployed people additional assistance during periods of high unemployment.
These extended benefit programs can pay up to 20 extra assistance, in addition to the typical six months of ordinary government benefits.
“Reveal flaws”
But a flawed design has led 33 states to end their extended benefit programs since the fall of 2020, even as long-term unemployment continues to rise, according to the report.
According to a conservative estimate in the analysis, nearly 315,000 people lost benefits.
“The pandemic has exposed flaws in the way these triggers are currently being designed, leading to the abolition of automatic assistance in many countries when their workers are experiencing rising unemployment,” said Alex Bell, Thomas Hedin, Geoffrey Schnorr and Till von Wachter said. who co-wrote the report.
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States automatically pay extended benefits based on the “insured unemployment rate.” (Some states use an alternative measure.)
The IUR is part of the labor force of a state that collects unemployment benefits. It differs from a state’s unemployment rate.
Most states offer extensive benefits if the insured unemployment rate exceeds 5%. All states except South Dakota paid these benefits at some point during the pandemic.
Insured unemployment rate
However, the insured unemployment rate only counts for Americans who receive regular state unemployment insurance.
It does not count that long-term unemployed workers receive assistance through extensions, such as the Extended Benefits Program or any federal programs created by the CARES Act. This means that it can ‘overestimate improvements in labor market conditions’, the co-authors wrote.
As a result, the insured unemployment rate of many countries fell below the 5% threshold, which ended the extended benefits in those areas.
In states such as Alabama, Maryland, Minnesota, Ohio, South Carolina and Virginia, a large proportion of people (approximately 20% to 30% of all workers who receive unemployment benefits) lost their assistance once the programs ended, according to California Policy Lab.
According to the U.S. Department of Labor, only 16 states still paid those benefits on March 27th.
However, the authors of the report claim that the extension of the extended assistance in this way is counterintuitive during long periods of long-term unemployment.
About 1 in 4 unemployed workers was unemployed for at least a year in March, according to the Bureau of Labor Statistics.
‘While several unique aspects of the Covid-19 crisis have exacerbated the issue, including high long-term unemployment rates, higher propensity for the unemployed to claim benefits and high utilization of extensive benefit programs, this design issue hinders UI program’s ability to to respond to any serious slump, ”they wrote.
However, some who have kicked off extensive benefits have since been able to raise aid through temporary federal programs. The U.S. rescue plan extends aid through Labor Day.
Officials in Michigan, which ended its extended benefits program on Saturday, said this is likely to be the case for its residents.
“Fortunately, with the federal extensions implemented on March 27, claimants who were on the Extended Benefit Program will likely be able to receive the benefits through other federal programs, such as Pandemic Emergency Unemployment Compensation or Pandemic Unemployment Assistance,” said Liza Estlund Olson, acting director of the Michigan Unemployment Insurance Agency, said.
About 613,000 of the approximately 17 million people who collect unemployment benefits did so at the end of March via extended benefits, according to the Labor Department.