In the US, stop to the subsidies introduced for Covid. “But minimal impact on employment. Consumption? Will collapse by 8 billion in two months”

Was a Labor Day bitter this year for millions of American workers. The Stars and Stripes Labor Day, which is celebrated every year on the first Monday of September, was marked by the closing of the support programs at the unemployment initiated to counter the effects of pandemic. The Pandemic Emergency Unemployment Compensation (Peuc), which extended the receipt of regular unemployment benefits to those who were entitled to them up to 53 weeks, and the Pandemic Unemployment Assistance (Pua), which also extended subsidies to workers autonomous, independent, freelance e part-time were suspended by the federal administration, closing the taps a over 9 million people, affecting 35 million Americans, the 10% of the population. The declared objective of the administration is to incentivize the work but, despite the announcements of the excellent results in the labor market obtained in recent months, the California has initiated a new aid program and scholars and analysts show that the cut of subsidies be in fact irrelevant in employment growth, causing instead the vertical collapse of the consumption.

While unemployment benefits have just been stopped for the pandemic emergency, the White House announced major progress in job creation. According to the latest data released by Washington, the average claims for access to unemployment benefits are collapsed by 60% since the arrival of the new president and have reached their lowest level in the last 18 months. “Along with seven consecutive positive job reports they’ve almost seen 4.5 million from new jobs since the beginning of my administration, this decline in unemployment access claims is further proof of one economic recovery lasting “, declared the American president, Joe Biden, which underlined the primates achieved by his administration. “After anemic growth of only 60,000 jobs per month in the three months leading up to my first full month in office, we have now created 750 thousand jobs per month in the past three months – and we’ve nearly doubled the previous record of new jobs achieved by any other first-year president in their first seven months in office. “

Yet, in the country there is no shortage of voices and opinions of different tenor, starting with that of the governor of California, Gavin Newsom. In Los Angeles and the surrounding area, in fact, a distribution is underway new package of aid, aimed at almost two-thirds of the Californian population. The Golden State Stimulus II Program provides for a deposit of 600 dollars to citizens who in 2020 declared an income included between 0 and 75 thousand dollars, and an additional $ 500 for the families with children. “The Golden State Stimulus is the key to raising the people most affected by the pandemic and supporting the economic recovery of California, putting the money directly into the hands of the people who they will spend them for basic needs and within their local communities, ”the governor said. The US states that had already cut subsidies in recent months, rather than experimenting with a new one employment boom, they have seen on the contrary collapse the expense of a significant part of the population, the most fragile.

One studio published a few weeks ago by a group of researchers of Harvard University, Columbia University, University of Massachusetts Amherst and University of Toronto, entitled “Early Withdrawal of Pandemic Unemployment Insurance: Effects on Earnings, Employment and Consumption”, Illustrates how the cut of subsidies has not had a significant effect on employment, but rather has dented directly i consumption. In June 22 US states they had already stopped the distribution of any subsidies introduced due to the pandemic, completely cutting aid a 2 million people and by reducing the subsidies of 300 dollars a week to an additional million people. Through an anonymous analysis of banking transactions and comparing the states that had cut or eliminated subsidies with the behavior of people in others 23 States that had kept the aid, the researchers found that the reduction in the distribution of subsidies from 35% caused an increase in employment solo of the 4.4 percent.

In an economy that still has 5.7 million jobs less than in the pre-pandemic context, according to the researchers only 1 person su 8 whose subsidies were cut in June, for example August he had found a job. For the total number of workers involved, the average reduction of 278 dollars a week of aid was controbilanciata gives an average income of $ 14 a week, compensating only 5% loss of income. And causing a immediate collapse of the consumption, decreased by $ 145 a week. “There are 12 million people receiving subsidies, most of which refer to the PUA and PEUC programs that are about to expire,” the researchers wrote a few weeks ago, anticipating what has happened in recent days. “This means the impact could be about 4 times the one recorded with the June cuts ”, suggesting that there may be about half a million from new employees, but in the face of 4 million people looking for a job they will not find a job. Not to mention the reduction in consumption that researchers estimate in September and October of 8 billion dollars.

Similar conclusions were suggested by another study titled “Micro and Macro Disincentive Effects of Expanded Unemployment Benefits”And signed by researchers from the Jp Morgan Chase Institute and the University of Chicago and National Bureau of Economic Research (Nber). “The disincentivo to employment generated by the expansion of subsidies is quantitatively reduced“, The scholars write, showing how the job search rate, that is the rate at which the average unemployed worker in the economy finds a job, has gone from’1,6% al 2,4% per week following the end of benefits, but remained well below the 5% average per week prior to the pandemic. The $ 600 subsidy would therefore have had an employment-reducing effect 0,8%, while that of 300 dollars of the 0,5 percent. Figures that have led researchers to clearly state that “unemployment benefits are not the key factor job search rate ”and that US policy decisions have responded well to loss of income of the population due to unemployment, with minimal impacts on employment.

The weekly report of the Department of Labor, in its latest edition before the closure aid programs, highlighted what they were like 9.2 million US citizens to benefit from Pandemic Emergency Unemployment Compensation (PEUC) and the Pandemic Unemployment Assistance (PUA). And in early September another 100 thousand people they had started the practice to be able to join the PUA program. According to Household Pulse Survey of the Census Bureau, the families that adhered to these programs were composed on average of 3.8 members: means that about 35 million people, 10% of the US population, belong to a family that just has lost the state aid to combat unemployment.

In a very delicate situation, meanwhile, a new front of tension. In many states, a not inconsiderable number of grant recipients have been reached by one refund request, both following errors in distribution, both because they are directed to non-owners, and after one redetermination criteria. In Michigan, for example, a 690 thousand citizens was asked a few weeks ago to proceed with the request again, following the change in the award criteria. While 240mil they again provided their data and their qualifying situation, the other 350 thousand did not respond to the request. At first the director of the program, Liza Estlund Olso, had shown peace of mind and assured that “applicants who are no longer eligible should not give back the money received when, through no fault of their own, they chose one of the four ineligible reasons “. But today his office is in the eye of the storm, following investigations by the Michigan House Oversight Committee, which have revealed 500 thousand attempts to access subsidies in a fraudulent manner e 5.3 million requests total aid in the last year and a half. Twenty-six times above the average level of requests and more than half of all Michigan citizens. Similar investigations are also underway in other states.

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