(Bloomberg) -- Ending emergency unemployment benefits had a significant impact on boosting US employment, according to a new Federal Reserve Bank of St. Louis working paper that may underline Republican criticism of a 2021 program.
The federal government provided enhanced unemployment benefits during the pandemic -- which propelled a loss of some 22 million jobs -- increasing eligibility to many individuals who would not otherwise be covered, boosting the amounts paid and extending their duration.
President Joe Biden maintained the beefed-up assistance in his March 2021 Covid-19 relief package, a move criticized by many Republicans as the job market by then was on the rebound. By spring 2021, some business owners complained the generous benefits were contributing to difficulties filling job vacancies running near all-time highs.
Many benefit recipients saw a more than one-for-one replacement rate on lost earnings, whereas, before the pandemic, unemployment insurance benefits typically replaced less than half of lost earnings, according to the St. Louis Fed researchers.
By May 2021, governors in 26 states announced they would end some or all participation in the emergency unemployment benefits, ahead of the federal expiration in September 2021.
The new Fed paper finds that for every 100-person reduction in beneficiaries, state employment increased by about 37 persons.
The Fed researchers found that the results are “robust when controlling for observable differences across states, including the number of Covid-19 cases and deaths and the share of employment in leisure and hospitality.”
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