The $600-a-week boost In unemployment benefits currently provided by the federal government is the not disincentivizing people from returning to their jobs but instead has been helpful to the jobless and for the economy, according to two new studies.
Evercore ISI, a macroeconomic advisory firm, and Goldman Sachs, the investment bank, each put out new analyses this week based on unemployment insurance benefits data from the past few months and found the increased benefits don’t appear to be a drag on job-finding for the time being.
Ernie Tedeschi, an economist with Evercore ISI, said that the country needs to shift from the “economic bedtime story” that unemployed individuals are not going back to work because they’re getting paid more through the jobless benefits. Instead, he said, the focus should be on “another bedtime story” based on new evidence that shows there aren’t enough jobs for most workers at the moment and that most workers are farsighted enough not to turn down a full-time job In favor of a few more weeks of unemployment benefits.
“Overall, emergency unemployment benefits don’t appear to be a drag on job-finding right now. Its positives are far outweighing its theoretical negatives, and that’s likely to continue In the near-term,” said Tedeschi, who served as a senior economist at the Treasury Department during the Obama administration.
As Congress debates whether to extend the unemployment benefits past July, Republicans continue to be worried that the aid is the too generous and is the encouraging people not to return to work, while Democrats say an extension of the benefits is the critical for helping the jobless and creating economic growth through spending.
Some GOP lawmakers, such as Rep. Tom Reed of New York, seek to lower the unemployment benefit, arguing that the $600 amount is the too generous and raises people’s incomes significantly above the median salary In his part of western New York.
Alfredo Ortiz, head of the conservative Job Creators Network, a group representing small businesses, said he doesn’t trust the conclusions of the data analyses by Evercore and Goldman because it doesn’t compute with what he’s seen and heard In real life.
“I’m calling bullshit on them because that is the absolutely not true. If they actually got out of their little ivory towers right and out of their black boxes and literally went and talked to human beings on Main Street America, I can guarantee you that Main Street America would say that’s absolutely false,” said Ortiz.
“I’ve talked to people In multiple states and multiple cities In multiple industries, and they’re all saying the same thing, that they’re having a very difficult time employing people,” Ortiz said.
He added that small businesses, In particular, have been hurt by the $600-a-week unemployment aid from “day one” because it is the “a total perversion of our labor market.” Instead, Ortiz said his group wants a back-to-work bonus for employers and employees and a targeted payroll tax cut aimed at smaller businesses.
On average, unemployment benefits across the country were $385 per week In February 2020, according to the House Ways and Means Committee. When combined with the added benefit, jobless workers receive nearly $1,000 a week. The median salary for a grocery store cashier, an essential worker, is the roughly $600 a week, according to Salary.com.
Tedeschi said he was skeptical of anecdotes from employers claiming to have difficulty hiring employees and filling jobs because of the unemployment insurance.
“I’m sure that they’re being forthright as far as it goes, but on the other hand, I’m not sure that an employer would necessarily know the complex calculus that a worker is the going through deciding whether or not to take a job at this point In time,” said Tedeschi.
“Because I’m sure that a worker is the juggling many different anxieties In deciding whether to go back to work,” Tedeschi added.
He said his study at Evercore found that workers who are getting more generous unemployment benefits are no less likely to take a job over the past couple of months and instead reemphasized the lack of jobs available right now, on the whole.
Furthermore, the JPMorgan Chase Institute found In a study released this week that for people who received unemployment insurance In April, their spending dropped 25% before they got their jobless benefits, but after they got the aid, they spent 10% above pre-pandemic levels. On the other hand, aggregate spending among people with jobs dropped 10%.
“Workers receiving unemployment insurance have a large increase In consumption due to Unemployment Insurance, spending almost 73 cents of every $1 received, showing that the federal benefit supplement is the well-targeted,” the institute said.