Before the French Revolution, the Palace of Versailles, the principal royal residence of France, was the center of government. The gorgeous architecture, the beautiful scenery, and the overall opulence were perfect for the nation’s monarchy – and a target for the rebels. For decades, the leaders and policymakers rarely set foot outside of Versailles, making them disconnected from the rest of the country. The Royal Court still stands today as an artifact of French history, but it also serves as a reminder of concentrated power and how out of touch the nation’s representatives can be when they refuse to exit their comfort zones and corridors of power and excess.
In the United States, the same concept could apply to Washington’s denizens. Whether it is the White House or the legislative branch, politicians believe that what goes in the nation’s capital should apply to Biloxi, MS, or Portland, OR. Case in point: unemployment benefits in the post-pandemic economy.
26 States Reject Biden’s Checks
In May and June, 26 states decided to prematurely eliminate the federal supplemental benefit that sweetened unemployment checks by $300 per week. For a significant portion of the workforce, this was enough of a deterrent to return to the labor market, with workers instead choosing to sit on the sidelines, catch up on classic Agatha Christie novels, and listen to the latest Joe Rogan podcasts.
Many Republican-led states, such as Alabama, Georgia, Iowa, South Dakota, and Texas, scrapped the program over the last two months to push out-of-work Americans to find employment. Indiana wanted to abolish at least one of the pandemic-related jobless programs, alluding to ubiquitous worker shortages. However, a state judge ruled that the benefits must continue until a lawsuit challenging the decision works its way through the justice system. Several more states are planning to do away with them by the end of July.
The federal weekly boost is scheduled to expire on Sept. 6.
That said, considering that the U.S. economy is now experiencing a record number of job opportunities, it might not be too difficult to locate white- or blue-collar work. According to the Bureau of Labor Statistics (BLS), the number of job openings has soared to an all-time high of 9.286 million, with most of the positions available in accommodation and food services and manufacturing.
What’s the deal? Is it the padded pandemic benefits or something else that cannot be quantified? Arkansas Governor Asa Hutchinson (R) said in a statement, “Our economy has come back, we have jobs aplenty. We cannot pay extra compensations for workers to stay home.” President Joe Biden claimed he does not see evidence that his administration’s $300 increase contributes to a slowdown in the labor market. Is there any data to support either claim?
The Data Say …
While the figures may be too early to tell, there is some information to comb through and disseminate.
Morgan Stanley discovered that initial jobless claims and continuing jobless claims fell faster in the ten states where benefits expired on June 19. When more states hop on the bandwagon these next couple of weeks, it could be crucial for the labor supply and higher payroll numbers, one of the world’s largest financial institutions explained in a research note.
The Wall Street Journal also reported on June 27:
“The number of unemployment-benefit recipients is falling at a faster rate in Missouri and 21 other states canceling enhanced and extended payments this month, suggesting that ending the aid could push more people to take jobs.”
According to data published by the online jobs site Indeed, employment search activity was above the national trend in 13 states that terminated the benefits at the end of June. However, it was also below the national trend in a dozen states that removed the temporary increase in the middle of June.
ZipRecruiter, another online employment search engine, found that the number of applications submitted in the week ending June 19 was up as much as 15% in the states getting rid of the benefits in that month. The website noted that individuals in states where the benefits were slashed in June wanted to return to work sooner than those living in states where the benefits will be intact longer.
The Missouri Department of Higher Education & Workforce Development highlighted a jump in traffic at its job centers. The pandemic benefits were halted in the Ozark State on June 12.
Still, analysts might not be able to determine the positive or negative effect President Biden’s increased benefits had on the labor market until the end of the year. Right now, basic economics dictates that when the government subsidizes something, it gets more of it. In this case, when the state pays workers to stay home, more Americans will sit on the sofa and twiddle their thumbs. But then there are added factors, such as unemployed folks unable to get child care or those who need to look after ill relatives, to consider.
An Economist’s Dream: A Real-Time Experiment
Whatever the case may be, it is clear that the labor market in GOP-led states is stabilizing, while Democrat-controlled jurisdictions are languishing. Indeed, the present-day U.S. labor market provides economists with an economic experiment in real-time to ascertain if unemployment insurance benefits and President Biden’s extra sugar have done more harm than good for the post-coronavirus recovery. For now, it is safe to lean on the side of elementary economics and conclude that the $300-a-week bonus has exacerbated the labor shortage.
~
Read more from Andrew Moran.
Photo by Got Credit 
