Outdoor dining tents under structures in Arlington, Virginia, on Feb. 5, 2021.
Liu Jie / Xinhua via Getty
According to a study published Tuesday by the California Policy Lab, more than 300,000 Americans lost unemployment benefits prematurely during the Covid pandemic.
That’s because many states are accounting for unemployed workers, which has underestimated the severity of the recession, the analysis said.
State unemployment systems have an automatic mechanism that pays extra support to the long-term unemployed during periods of mass unemployment.
These Extended Benefits programs can pay for up to 20 extra weeks of assistance, on top of the typical six months of regular state benefits.
‘Exposed defects’
But flawed design has resulted in 33 states ending their Extended Benefits programs since the fall of 2020, even as long-term unemployment continued to rise, according to the report.
According to a conservative estimate in the analysis, nearly 315,000 people lost their benefits as a result.
“The pandemic has exposed flaws in the way these triggers are currently designed, which have led to the removal of automatic help in many states when their workers face rising unemployment rates,” said Alex Bell, Thomas Hedin, Geoffrey Schnorr and Till von Wachter, who wrote the report.
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States automatically pay extended aid based on the “insured unemployment rate”. (Some states use an alternative measure.)
The IUR is the proportion of a state’s labor force that receives unemployment benefits. It differs from a state’s unemployment rate.
Most states offer comprehensive benefits when the insured unemployment rate is above 5%. All states except South Dakota paid for these benefits at some point during the pandemic.
Insured unemployment rate
However, the insured unemployment rate only counts Americans who receive regular unemployment insurance from the state.
It does not count that long-term unemployed workers receive assistance through extensions such as the Extended Benefits program or federal programs established by the CARES Act. That means it “can exaggerate improvements in labor market conditions,” the co-authors wrote.
As a result, many states’ insured unemployment rates have fallen below the 5% threshold, ending extensive benefits in those areas.
In states like Alabama, Maryland, Minnesota, Ohio, South Carolina and Virginia, a large proportion of people (about 20% to 30% of all workers receiving unemployment benefits) lost aid once the programs ended, according to the California Policy Lab.
Only 16 states paid those benefits on March 27, according to the United States Department of Labor.
However, ending extended aid in this way is counterintuitive during high periods of long-term unemployment, the report’s authors claimed.
According to the Bureau of Labor Statistics, about 1 in 4 unemployed workers had been out of work for at least a year in March.
While several unique aspects of the Covid-19 crisis have exacerbated the problem – including high rates of long-term unemployment, a greater propensity for unemployed people to claim benefits and a high use of extensive benefit programs – this design problem hinders the ability of the UI program to respond to a serious downturn, ”they wrote.
Some who got kicked off with Extended Benefits may have since been able to garner aid through temporary federal programs. The American Rescue Plan extended aid until Labor Day.
Michigan officials, which ended its Extended Benefits program on Saturday, said this is likely the case for its residents.
“Fortunately, with the federal extensions implemented on March 27, applicants enrolled in the Extended Benefits program will most likely receive benefits through other federal programs such as Pandemic Emergency Unemployment Compensation or Pandemic Unemployment Assistance,” Liza Estlund Olson, acting director of the Michigan Un Employment Insurance Agency, said.
According to the Department of Labor, about 613,000 of the approximately 17 million people receiving unemployment benefits did so through Extended Benefits at the end of March.