Federal unemployment benefits kept millions from returning to work, study finds

Increased federal benefits last year perpetuated unemployment and kept millions of Americans from returning to the workforce, a new study released Wednesday reports.

The Texas Public Policy Foundation published the report, which evaluated the impact of federal handouts, particularly the controversial federal unemployment payments of $300 per week. More than two dozen states opted out of the federal program before it was set to expire last year, citing the elevated joblessness, while blue states largely continued to take the federal money.

The report found that “3 million more people stayed on unemployment in states that maintained the increase in benefits versus the states that ended the program early.”

“The takeaway is not just that some states improved their employment numbers and some didn’t,” the report’s author, E.J. Antoni, said. “It’s that extending unemployment benefits had a significant negative impact on the ability of communities to recover from the pandemic. Lives and livelihoods were put on hold for a much longer period than was necessary as a result of this wrong-headed policy.”

The weekly unemployment payments would not be enough for many Americans to live on, but when combined with state unemployment, stimulus checks, and a range of other state and federal programs, they were enough to make staying home more appealing than returning to work for millions of Americans, according to the study.

“Even at higher incomes, the supplemental benefits, in conjunction with other government programs and payments, provided the equivalent of a $100,000 annual income for a family of four in 19 states and the District of Columbia,” Antoni said.

The federal unemployment payments ended in September of last year, but many states left months earlier. The report adds that states that refused the federal funds saw employment numbers increase by more than 2 million.

Antoni said the federal programs “created a considerable disincentive for many people to return to work or even to continue working an existing job.”

Critics of the program also point out the rampant fraud and abuse that occurred while delivering the billions of dollars in federal funds. A Government Accountability Office report found that in just the first year of the pandemic, April of 2020 through March of 2021, states and territories overpaid unemployment benefits by $12.9 billion in taxpayer dollars.

Congress gave the Department of Labor $2 billion to prevent the waste and fraud, but it did not stop the rampant waste uncovered by the government watchdog’s report.

“The American Rescue Plan Act of 2021, enacted March 11, 2021, subsequently provided DOL with $2 billion to detect and prevent fraud, promote equitable access, and ensure the timely payment of UI benefits,” the report says. “As of May 20, 2021, DOL officials said that DOL was working to develop detailed plans for this $2 billion in coordination with the Office of Management and Budget, and noted that developing spending plans across 53 states and territories involves complex considerations.”