September 5 marked the end of the federally backed COVID-19 pandemic unemployment benefits. This spells the end for four types of unemployment benefits approved due to the COVID-19 pandemic: federal pandemic unemployment compensation, pandemic emergency unemployment compensation, mixed earners unemployment compensation and pandemic unemployment assistance. 7.5 million Americans will lose enhanced unemployment benefits as a result, according to a Century Foundation estimate.
The expiration of the benefits, which were intended to be temporary through the COVID-19 pandemic, coincided with the expected return to normalcy around Labor Day. With the rise of the COVID-19 Delta variant, return-to-office plans are being shelved, international tourism is largely shut down and entertainment and restaurant industries are seeing slowdowns according to the NY Times.
Long term unemployment causes productivity and socioeconomic well-being to decline. “Long periods of extended unemployment do represent a use of [government] resources that could be spent [elsewhere],” said Dr. Robert Cunningham, associate professor of economics at Alma College. “Workers who are unemployed for extended periods see that their chances to become employed again begin to decline. Other social problems become more prevalent as unemployment persists, [such as] higher divorce [and] crime rates.”
Biden has encouraged states to extend these benefits at their discretion, and Congress had allotted $350 billion for states to provide financial relief to their citizens, but it is looking unlikely that many states will take this opportunity to extend the unemployment benefits.
The roadmap to recovery from here is uncertain given the Delta variant, and it is unclear how ending unemployment benefits will affect this recovery.
“We know that [ending enhanced unemployment benefits] will take spending out of the economy. We also have the unwillingness of still too many of us to get vaccinated, and thus we are now having some states essentially shut down again,” said Cunningham. “Consumer spending increases slowed in August, and fewer new jobs were added. I think we will see a period of bumpy economic activity.”
Approximately 26 states have already ended enhanced unemployment benefits on the grounds that the benefits disincentivize returning to work, according to Forbes. These states did not see a decline in unemployment or significant economic growth, according to the NY Times.
“[This] suggests that something else is entering into people’s decisions to return to work,” said Cunningham.
Congress’ refusal to extend the unemployment benefits further might not bode well for other pandemic-era action items for Congress and the Biden administration. For example, the further cancellation of student loan debt. Biden has cancelled $9.8 billion in federal student debt thus far, but he argues that he does not have the legal authority to expand this program to all student loan debt, according to Forbes. This has become a point of contention in Congress, with prominent democrats arguing that he does in fact have the authority to do so, which would allow Congressional democrats to sidestep the long path to enacting the necessary legislation to cancel debt.
It remains to be seen how the ending of other pandemic-era policies will impact Washington’s dialogue around student loan debt