Unemployment insurance (UI) benefits have been a financial lifeline for many workers and their families who lost jobs during the COVID-19 pandemic. In response to unprecedented widespread job loss and the need to keep workers safe from infection, in March 2020 the federal government expanded Unemployment Insurance to better replace lost wages, stabilize family incomes, and include workers often left out of UI. This sought t0 prevent deeper hardship and a more catastrophic disruption in the economy.
As more folks get vaccinated and start returning to some of their pre-pandemic activities, the economy is showing improvement. But obstacles to getting back to work remain. The country is still recovering, with still over 8 million jobs lost as of April 2021 compared to February 2020, including over 200,000 jobs lost in Minnesota.
However, several states have announced they are prematurely opting out of federal pandemic unemployment benefits. This could mean the loss of over $12 billion in economic support for 2.2 million jobless workers and their communities, and disproportionately harming low-income and Black, Indigenous, and people of color (BIPOC) workers. Continuing pandemic UI benefits will be essential to stabilizing unemployed workers’ incomes until our communities and the economy more fully recover.
Unemployment Insurance is doing its job – helping people, getting the economy back on track
Federal and state UI benefits have been critical to stabilizing the incomes of hundreds of thousands of jobless workers in Minnesota. The ability of everyday families to pay for necessities is an important driver of a healthy economy; in fact, one of the most effective ways to stimulate the economy is to put dollars into the hands of those who will quickly spend them on basics like rent, groceries, health care, household items, and more.
To respond to the deep economic effects of the pandemic, federal policymakers made three important temporary improvements to unemployment insurance. These changes increased the weekly amount of support that workers receive – currently a $300 weekly boost, expanded coverage to include workers usually excluded from UI benefits, and extended the number of weeks that benefits may be received.
This has translated to billions of dollars coming into the pockets of workers at the time they need it most. The federal government has provided about $8 billion in UI benefits since the pandemic’s start to replace lost wages so 1.4 million Minnesota jobless workers who have applied for unemployment insurance could continue to pay the bills. In 2021 alone, federal pandemic unemployment insurance benefits will total $2.2 billion to over 300,000 Minnesotans looking for work until the federal UI extension expires in September.
As the economy has changed, some have mistaken the experiences of a few industries for a more widespread labor shortage. Instead, let’s take a closer look at what’s really driving labor market trends in those industries.
For example, throughout the COVID-induced recession, the restaurant industry has been one of the hardest hit, with nearly half of workers in the sector losing jobs early in the pandemic. This level of job loss was somewhat specific to “face-to-face” industries like restaurants and other parts of the hospitality industry. Thanks to increased vaccinations and declining COVID-19 cases, the restaurant sector is starting to recover. In April, the sector led all industries in job growth, primarily a result of increased demand for in-person dining as more people get vaccinated.
But there are still barriers for many to return to work. Only about 46 percent of the U.S. population are fully vaccinated, meaning that many are still not safe returning to work. And many working parents continue to have a hard time finding adequate care for their children and other family members as they seek to reenter the labor market. For these workers, continued access to unemployment insurance is critical. Increasing access to vaccinations and addressing child care disruptions as well as the other challenges workers faced prior to the pandemic – are key factors in supporting workers to return safely to their jobs.
Combining an understanding that labor shortages are limited to some sectors, plus an understanding of the serious barriers that workers still face to getting back on the job – these point to where policy interventions make sense. Eliminating pandemic UI is unlikely to do much to change these conditions, and would increase hardship for folks who are still struggling.
Taking away UI would disproportionately hurt workers of color and workers with low incomes
Eliminating pandemic UI benefits would weaken the economic recovery, and also disproportionately harm low-income workers and workers of color. While higher-income worker were much more likely to be able to work from home, many fewer low-wage workers have had this option. This is reflected in the unemployment numbers. More than half of all initial unemployment claims in Minnesota since mid-March 2020 were from workers in lower-paid occupations. Additionally, Minnesota workers of color are still experiencing higher unemployment rates. As of earlier this month, Black workers comprised 17 percent of all unemployment applicants, higher than their share of the population of 6 percent.
Eliminating UI benefits before all workers are able to get back on the job safely could disproportionately send workers of color back to working in hazardous conditions. Minnesotans of color have suffered from COVID-19 infections and deaths at higher rates compared to white Minnesotans. Workers of color are overrepresented in jobs with the greatest risk of being exposed to infection. They also have faced larger barriers to vaccine access, which has contributed to significantly lower rates of vaccinations for communities of color. As of June 19, 2021, while 63 percent of white Minnesotans had received at least one dose of a COVID-19 vaccine, the same was true for only 51 percent of Black Minnesotans, 49 percent of Indigenous Minnesotans, and 55 percent of Latinx Minnesotans.
States should maintain and strengthen UI as part of an equitable recovery
The disproportionate impact of the COVID-19 pandemic has exposed how disparities in access to good jobs and an insufficient social safety net can financially burden and compromise the health of people of color and low-income workers.
Recovery efforts from this pandemic should ensure that workers of color and low-income workers and their families can recover more quickly than in past economic downturns. When the response to recessions has been too weak and did not focus on those bearing the greatest hardship, the recovery was slower and racial disparities widened. Prematurely ending pandemic UI would be repeating this mistake.
We cannot return to a pre-pandemic "normal." Instead, we have to build a future that better addresses the needs of workers and our communities. The policy expansions enacted during this pandemic took aim at many of the shortcomings of Unemployment Insurance, including he ways that many workers were left out and benefit levels that are too small for workers and their families to get by on. Policymakers should make permanent changes to their UI programs to ensure they are inclusive of more workers and more effectively replace lost wages.