Nobody wants to work because of unemployment checks? That’s not what the numbers say

Weeks after the U.S. Supreme Court lifted the eviction ban, potentially placing millions of Southerners in danger of losing their homes, the government’s $300 a week Federal Pandemic Unemployment Compensation (FPUC) came to an end Sept. 6.

The double blow, which comes during a spike in Covid cases in all Southern states, marks the end to two hotly debated federal programs aimed at helping people affected by the pandemic.

The abandonment of the federal assistance program was in part because of a sluggish job report in April. By the end of July 2021, 26 states had opted out of the federal program and what’s known as Pandemic Unemployment Assistance (PUA), which extended benefits to previously uncovered people, such as self-employed, independent contractors and those working in the gig economy.

While most Southern states opted out of the program in June, hoping the loss of the benefit would prompt unemployed citizens back to work and continue to lower already falling unemployment rates, four Southern states stayed the course: North Carolina, Virginia, Kentucky and Louisiana. Those states have Democratic governors. The rest are led by Republicans.

Under President Trump and early in the pandemic, the federal portion of unemployment was $600, a supplement to state unemployment. That expired during his presidency in July 2020 and was later renegotiated in Congress to $300 a week as part of President Biden’s American Rescue Plan.

Although half of the previous figure, Republicans opposed it, claiming that the money would incentivize unemployment during a time when employers were struggling to find workers.

But did the opt-out really work?

While economists will be looking closely at the numbers in the coming months, following the end of the program nationwide, there are reports and data from over the summer that give valuable insight.

An academic paper published in mid-August showed that opt-out states had achieved very limited success in getting people back to work compared to the states that continued in the program. The paper said opt-out states saw a 4.4% percentage point jump in employment. While some might see that as a success, the researchers point out that depriving people of the benefit saw only 1 in 8 obtain a job. 

Keep in mind, the $300 a week payment was at no cost to those states.

The paper analyzed the 22 states which opted out in June. Seven of those were in the South. Texas opted out in early July.

People are staying away because of a number of different factors, such as concerns about covid or being needed at home by ageing relatives or children that cannot attend school, according to some economists. In addition, baby boomers retiring has also created gaps, as well as people simply not willing to work for minimum wage. To combat the workers shortage, employers are going with the full court press, with some business owners offering far higher hourly wages, signing bonuses and even 401ks in sectors that previously didn’t offer the perk.

A separate study, which also looked at nationwide employment trends between June and July, noted that overall employment fell by 0.9% in states that opted out of the program, compared with 2.3% for states that remained in. 

In the South, opting in or out of the federal benefit hasn’t seemed to make much of a difference at all. 

For example, some Southern states that continued in the program added more jobs than opt-out states. Between June and July, North Carolina increased its nonfarm employment by 1.7%, more than any other Southern state and all but two other states nationwide, according to data from the Labor Bureau of Statistics.

North Carolina remained in the program until it expired on Labor Day. 

Tennessee, which left the program in June, saw its employment drop by 0.2% in July. Similarly, Kentucky, which continued allowing the benefit, saw a 0.3% percent drop.

The next jobs report is released Sept. 17. 

The Reckon Report.
Sign up to receive the Reckon Report newsletter in your inbox every Tuesday.