Millions Will Lose Unemployment Benefits. That Doesn't Mean They'll Return To Work

Jobs such as Marianne LeBlanc's — staging in-person corporate events — have been slow to return as the pandemic wears on, especially in Nevada, which has the nation's highest unemployment rate.

LeBlanc has found work for a few days here and there but nothing steady. She worries that the latest surge of the coronavirus with the delta variant will put even that limited comeback on hold.

"I was doing a project three weeks ago, and that was the week when all the mask mandates went back into play," LeBlanc recalls. "We all looked at each other like: 'Oh God. Is this all going to happen again?' Just when you think you might see the light at the end of the tunnel, it's gone again."

A bigger worry for her is that emergency unemployment benefits run out nationwide in less than a week. That ends an important safety-net program that millions of Americans have been relying on during the pandemic. At last count, more than 12 million Americans were getting some form of unemployment assistance. Most will be cut off entirely next week. The rest will see their benefits reduced.

Unemployed people in states that cut off benefits early didn't come rushing back to work

These extra federal benefits have become a lightning rod. Many business owners and politicians complain the money is encouraging people to stay home, rather than return to work, leaving employers with a shortage of workers.

But research shows that most people who lose their benefits don't find jobs right away.

About two dozen states ended the federal jobless aid earlier this summer in hopes that would drive many more people back to work. But despite a record number of job openings, it didn't. Unemployed people in states that cut benefits early were only slightly more likely to find jobs than those in states that kept paying.

"There wasn't a huge difference in the rate at which they returned to work," said economist Michael Stepner of the University of Toronto, who was part of a team that conducted the research. "There was a huge difference in the amount of benefits these workers received and the amount of money that they spent in their local economy."

That pattern is likely to be repeated across the country when millions of people lose their benefits next week.

"Taking away their benefits is not going to send them back to work," Stepner said. "It's really going to increase poverty and reduce people's spending."

Ending the benefits likely will have ripple effects throughout the economy.

"These are people that buy groceries and put gas in their car and frequent local businesses," LeBlanc said. "When that money is not there, it's not just going to be the person who's unemployed that's going to suffer. It's going to be the entire community that suffers."

Several emergency jobless benefits were launched during the pandemic

Chenon Hussey's household in West Bend, Wis., will lose about $2,800 in monthly aid.

"It's hard when you're raising a family," Hussey said. "You don't have any idea what the next few months are going to look like."

Hussey and her husband have benefited from several emergency unemployment programs the federal government launched during the pandemic.

One program extends jobless benefits to gig workers and the self-employed, which helped replace some of Hussey's lost income as a motivational speaker. Another boosts traditional unemployment benefits by $300 per week, which was crucial when her husband was temporarily furloughed from his job as a master welder. A third program extends aid to people who are out of work for more than six months.

All three programs expire on Monday.

Hussey and her husband have both taken some temporary jobs but don't feel like they have much control.

"At the beginning of the year, there were some conferences that got scheduled, and I booked them," Hussey said. "But in the last two months, those conferences have been postponed, because there's so many uncertainties."

Economists at Wells Fargo estimate that once pandemic programs expire in the remaining states, federal unemployment payouts will drop from $32 billion a month to around $3 billion.

While wages and a new child tax credit will offset some of that drop, "the increases in various other categories of personal income will not be enough to offset the hit from jobless benefits going away," the economists wrote.

The Biden administration says if states choose, they can redirect other federal funds to extend jobless benefits beyond next week. So far, though, no state has announced plans to do so.

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