26 states now plan to end, or have already ended, the $ 300 enhanced federal unemployment benefit before its official expiration date. The additional $ 300 was provided in addition to state unemployment insurance and was scheduled to expire on September 6; however, 25 states led by Republicans and one led by Democrats announced that they would cut the $ 300 before that data. The governors of these states have argued that expanded unemployment benefit payments have created a disincentive for workers to return to work. Indeed Hiring Lab’s job search data provides a clue as to what happened when states declared benefits would expire early.
Mixed effect after the announcement that the $ 300 unemployment benefit would end early
Jed Kolko, Chief Economist at Indeed Hiring Lab, published a post that discusses job search activity on Indeed, an employment website, before and after states declared an end to benefits. He noted that in May, there was an increase in job search activity in states that had announced an early end of the $ 300 federal unemployment benefit, compared to national trends. In fact, there were nearly 5 percent more job posting clicks in states that were ending the benefit early on the day the governor made the announcement, when compared to the last two weeks of April. Importantly, “this increase was temporary, disappearing on the eighth day after the announcement,” Kolko wrote. “In the second week after the announcement, the state’s national click-through rate was no higher than during the baseline in late April.”
Kolko provided updated data in early June that many governors who canceled benefits may not want to see. “Search activity has increased in some states that are opting out of federal unemployment insurance benefits soon and has decreased in others,” he said. Interestingly, there are four states that chose a draconian deadline to end benefits, June 12, which is almost three months before the official end date of September 6. Kolko and the Indeed Hiring Lab team found that “the proportion of job search activity”
Indeed Hiring Lab job search activity data shows that while some states that ended the $ 300 improved unemployment benefit early saw an increase in clicks, others saw a decrease.
This was consistent with search activity in states that were also ending the $ 300 benefit on June 19. One would expect search activity to increase especially in those states where the above benefits are ending, but Indeed data did not find this. As Kolko noted, “If overly generous federal unemployment benefits hold back job applicants, then we would expect search activity to increase, relative to the national trend, in states where those benefits end earlier.”
Indeed data supports the findings of other researchers. For example, a working paper by researchers from the Federal Reserve Bank of San Francisco concluded that expanding unemployment benefit payments has not created a strong disincentive for workers to return to their jobs. Specifically, they found that the current weekly federal unemployment benefit of $ 300, which is available to unemployed workers through September 6, has had only a small effect on the job search rate.
The Fed researchers wrote that “a simple way of thinking [it] is that every month in early 2021, about seven out of 28 unemployed people receive job offers that they would normally accept, but one of the seven decides to decline the offer due to the availability of the additional $ 300 per week in UI payments ” , the authors explain. “This implies a small, but probably notable, contribution from UI’s expanded generosity to job search rates and employer perceptions of worker availability in early 2021.”
In other words, ending the $ 300 profit appears to be only a small factor contributing to the labor shortage. The question for the 26 state governors who canceled the $ 300 benefits early now is: what will they do to address the remaining labor shortage?