Turns out that states that cut unemployment benefits early found that this did not translate into a large portion of people jumping into open vacancies. And while some might head scratch at this development, the answer is found buried in the article. The people who did get jobs saw an overall income decrease from the enhanced unemployment benefits. The reason people are not wanting to work is because employers aren't paying them a livable wage.
It’s important to underscore here that these figures represent employment differences among the cohort of people who were unemployed at the end of April. This is different from analyzing overall employment differences among the labor force in each state. Some or all of the 4.4 percentage points of extra people who got a job in the Withdrawal States may have done so at the expense of other job seekers, making the net effect on overall employment even lower than this figure suggests.
Cutting unemployment benefits in this way has two countervailing income effects. It directly reduces income from UI benefits while indirectly increasing income from the earnings of those who obtain employment as a result of the cut. The researchers estimate that earnings rose among the Withdrawal cohort by an average of $14 per week while benefits declined by $278 per week. Thus, the net income change was a decline of $264 per week, or $13,728 on an annualized basis.
Spending also decreased by $145 per week ($7,540 annually) in the Withdrawal cohort relative to the Retain cohort. This reduction in consumer spending will of course make it harder for businesses to hire people.
jacobinmag.com
They mention in the article that a large number of American families reducing spending is not going to be good for our economy. I think this will have a devastating impact on our economy that we probably won't see for another couple years, but if prices continue to rise, we are going to have a lot of families having issues buying food and being able to afford housing. This is unsustainable.
It’s important to underscore here that these figures represent employment differences among the cohort of people who were unemployed at the end of April. This is different from analyzing overall employment differences among the labor force in each state. Some or all of the 4.4 percentage points of extra people who got a job in the Withdrawal States may have done so at the expense of other job seekers, making the net effect on overall employment even lower than this figure suggests.
Cutting unemployment benefits in this way has two countervailing income effects. It directly reduces income from UI benefits while indirectly increasing income from the earnings of those who obtain employment as a result of the cut. The researchers estimate that earnings rose among the Withdrawal cohort by an average of $14 per week while benefits declined by $278 per week. Thus, the net income change was a decline of $264 per week, or $13,728 on an annualized basis.
Spending also decreased by $145 per week ($7,540 annually) in the Withdrawal cohort relative to the Retain cohort. This reduction in consumer spending will of course make it harder for businesses to hire people.
Recent Unemployment Cuts Made People Poorer Without Increasing Employment
The media breathlessly reported on labor shortages this summer, helping generate support for unemployment benefit cuts. But a new study shows such cuts didn't do much but devastate poor people's incomes.
jacobinmag.com
They mention in the article that a large number of American families reducing spending is not going to be good for our economy. I think this will have a devastating impact on our economy that we probably won't see for another couple years, but if prices continue to rise, we are going to have a lot of families having issues buying food and being able to afford housing. This is unsustainable.
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