Nearly half of US states withdrew federal unemployment benefits early. It has not incentivized a return to work

Nearly half of US states withdrew federal unemployment benefits early. It has not incentivized a return to work
Workers lined up at an employment development office in Calexico, California in 2007, Wikimedia Commons

Governors in half the states across the country opted to withdraw from enhanced federal unemployment benefits believing it would incentivize a return to work. However, new data suggests that isn't the case.

Back in May, multiple states announced their intent to end federally enhanced pandemic-era benefits and moved forward with their efforts in June. Now, according to CNBC, a total of 26 states are without federal unemployment. Ultimate Kronos Group (UKG), a payroll management firm, has noted that trends among hourly workers suggest that the return to work pace is approximately half of the expected rate.

The company's analysis breaks down the difference between states that ended and federally enhanced unemployment compared to the states that kept the incentive in place. UKG's analysis indicates: "Specifically, in states that ended benefits, shifts grew 2.2% from May through July; they grew 4.1% in the others that kept federal aid intact."

Dave Gilbertson, UKG's vice president, has noted that the analysis further proves that unemployment benefits did not disincentivize a return to work.

"Unemployment benefits were not the thing holding people back from going to work," Gilbertson said. "There are other elements out there, particularly in their personal lives, making it really difficult to go back to work."

Data published by the payroll and time management company HomeBase also shows a similar trend. According to that data, "employment fell 0.9% in states that ended federal benefits between mid-June and mid-July, but rose 2.3% in states that kept them."

While the latest data does serve as an early indication of the trend, Gilbertson noted that it may take a little more time to get a full scope and more details about the trend.

"It's an early view, there's no question," Gilbertson said. "It takes a while for folks to be able to rearrange their personal lives to start a new job.

"But I feel it's a pretty strong directional indicator."

Nick Bunker, Indeed Hiring Lab's economic research director for the United States, also explained what he believes the data suggests. ″[Data] suggest there's no clear evidence that [unemployment] programs going away early led to a significant increase in employment growth or job finding."

The latest comes just months after experts sounded off with concerns as they also noted that states were making a terrible economic mistake by ending the program.

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