At least 23 Republican states have announced a reduction in federal unemployment benefits during the pandemic, stipulated in President Joe Biden’s stimulus plan, in advance of the September 6 lifting of the transfers.
These unemployment benefits correspond to the $300 per week transfer to individuals who have applied for unemployment insurance assistance. This is in addition to the $1,400 stimulus checks that have been provided to more than 88 million Americans, resulting in transfers of up to $2,600 per month to the unemployed.
Economists have said that these unemployment benefits have limited the labor supply, and the evidence seems to show this by the low drop in unemployment over the past month, with only 266,000 new jobs opening up, despite more than 6 million job openings across the United States.
Others argue that the large number of unfilled vacancies is due more to a lack of skills than to unemployment benefits, i.e., unemployed people do not have sufficient qualifications or skills to fill those vacancies.
With the lifting of federal unemployment benefits in these 23 Republican states, 3.5 million Americans would run out of this inflow of money – within weeks.
Meanwhile, Democratic states do not plan to lift unemployment transfers, so the U.S. economy is about to see an experiment that will confirm whether these benefits truly discourage people from working, or whether the number of unfilled job openings is really due to a lack of skills on the part of the unemployed.
According to an analysis by the consulting firm Indeed, job searches rose by 5% in states that announced they were lifting federal unemployment benefits.
Lifting economic restrictions
Filling vacancies will depend not only on the lifting of unemployment benefits, but also on the lifting of economic restrictions in pandemic.
While in states such as Texas, Governor Greg Abbott ordered the full opening of the state in March, in New York, the Metz and Yankee Stadiums were barely able to open in April at 20% of capacity, and only in May were restaurants allowed to operate at full capacity. California only plans to lift its restrictions in mid-June.
The lifting of the coronavirus restrictions, of course, has influenced employment behavior in both Republican and Democratic states since earlier. Having had looser restrictions, the unemployment rate in Republican states has been on average two points below the unemployment rate in Democratic states.
Currently, Republican states have an unemployment rate of 4.5%, while Democratic states have an unemployment rate of 6.2%, a product of tighter restrictions on mobility and business closures.