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Cutting Federal Jobless Aid Didn’t Drive Ohioans Back to Work

Labor data suggests that Gov. Mike DeWine’s decision to cut the extra $300 of federal funds from unemployment benefits 10 weeks ahead of the federal deadline had little effect on moving people back into the workforce.

(TNS) — Six months after Gov. Mike DeWine cut enhanced benefits of $300 a week to unemployed Ohioans, the Ohio Supreme Court is examining the decision on legal grounds. Reviewing the separate labor data, however, suggests the decision did little to prompt jobless Ohioans to return work faster.

Those who supported the decision, like the Buckeye Institute, say other factors muddied the water, making conclusions hard to draw. But they contest the claim that keeping the $300 payments would have helped the economy. Critics of DeWine’s move, like Policy Matters Ohio, say it diverted hundreds-of-millions in federal tax dollars that could have helped Ohio’s economy recover from the COVID-19 pandemic.

The jobs and unemployment numbers now suggest the effect was minimal in moving people from unemployment to work.

The number of filled jobs in the Buckeye State grew 1.1 percent from June through preliminary data for October, lagging behind the 1.7 percent growth in the national average during the same time. And Ohio’s preliminary unemployment rate of 5.1 percent in October remains nearly unchanged from the 5.2 percent rate in June, while the U.S. unemployment rate fell from 5.9 percent to 4.6 percent.

“Based on a quick scan of the data, Ohio didn’t see any extra employment growth relative to the nation as a whole,” Robert Valletta, a researcher from the Federal Reserve Bank of San Francisco who has studied nationally the effects of enhanced unemployment benefits on job decisions, said during an interview in mid-November.

“If the goal was to get employment growth up over a sustained period, that didn’t happen as far as I can tell from the data.”

The $300 payments ended nationwide Sept. 4, 10 weeks after DeWine cut them off for Ohioans.

The Ohio Supreme Court is hearing arguments raised in a suit filed by three unemployed Ohioans who claim DeWine violated Ohio law by cutting the benefit. Retroactive payments are possible if the suit is successful.

The governor’s office, when asked, didn’t provide data to show if cutting the benefits improved job growth, saying it wasn’t the main driver of the decision.

DeWine, Other Governors, Cite Labor Shortage in Cutting Program

On May 13, DeWine announced Ohio would opt-out of the extra benefits known as FPUC, or Federal Pandemic Unemployment Compensation. Ohio eventually became one of 26 states, all but one Republican-led, to cut enhanced unemployment before the programs ended.

DeWine and Lt. Governor Jon Husted said at the time that employers in retail, restaurants, manufacturing and other sectors told them they were struggling to find workers, slowing down the state’s economic recovery.

“That extra $300 a week in federal pandemic unemployment compensation is, in some cases, certainly discouraging people from going back at this point in time,” DeWine said. “The assistance was always intended to be temporary.”

U.S. Bureau of Labor Statistics data shows Ohio has added jobs at a slower rate than the national average since DeWine’s announcement.

The Ohio data for October is still considered preliminary. From the time of DeWine’s announcement in May through September when the extra unemployment benefits ended everywhere, Ohio jobs grew 1.4 percent and jobs nationally grew 2 percent.

However, in the months leading up to DeWine’s announcement, Ohio lost jobs in three of the first five months of the year, while nationally jobs increased each month.

Another potential factor occurred at the same time, possibly opening up more work opportunities. DeWine on June 2 ended all statewide COVID-19 health orders.

A national study done by Valletta and researcher Nicolas Petrosky-Nadeau showed extra unemployment payments did have a “small, but meaningful effect” when it came to whether someone accepted a job offer, but the extra benefit was not the reason keeping most people out of work.

Their research implies that in early 2021, about 7 of 28 unemployed people found jobs each month, but 1 of those 7 was likely to decline a job offer due to enhanced unemployment benefits.

Valetta said the reduction in consumer spending, caused by stopping the payment, could also slow job growth — washing out the positive effects of cutting the enhanced unemployment.

He said data that compares all the states that kept enhanced unemployment versus the ones that rejected payments early “just don’t look that different.”

Valletta is not alone in that conclusion.

A study published in mid-August by researchers from Columbia University, Harvard University, the University of Massachusetts Amherst and the University of Toronto looked specifically at low-income and credit-constrained workers and found a similar trend.

The study said states that withdrew from enhanced unemployment insurance likely improved unemployment rates as a whole by less than half-a-percent. But it also says the U.S. lost $2 billion in spending because of the cuts.

Valletta said factors such as lack of childcare, health concerns or seeing available jobs as unstable likely had more of an effect on keeping people from going back to work but to what degree is unclear.

“I don’t think anyone has a good quantitative assessment of just how important those factors are,” Valletta said.

DeWine Spokesman Says Labor Shortage Not Main Reason for Cut

DeWine’s spokesman, Dan Tierney, said last month the governor opted out of the enhanced unemployment programs because they “lasted longer than the problems they were intended to alleviate.”

Tierney said DeWine heard anecdotally from businesses that the extra money made it harder for employers to find help, adding urgency to act, but it wasn’t the main reason for the decision.

DeWine, as well as Lt. Gov. Jon Husted, were widely quoted as saying the extra $300-a-week was making it hard to fill jobs when the decision was announced.

Tierney said enhanced unemployment was provided early in the pandemic to help people who had health concerns or whose place was work was closed. By May 2021, the vaccine was available and Ohio was aggressively working to reopen the state’s economy in a safe way, Tierney said.

“If the thesis is that the only rational was to address the complaint that it was keeping people out of the workforce, that was a misreading of the rational at the time,” Tierney said.

He also said week-to-week numbers aren’t the best way to judge the economy because of all the short-term factors that can affect employment and that longer-term Ohio is better off.

Muddy Waters

The Buckeye Institute, a conservative, free-market think-tank in Ohio, was one of the proponents of ending the enhanced unemployment payments early.

Rea Hederman, vice president of policy, said whether cutting the $300 payments worked to spur job growth is hard to know.

Valletta’s research and others, he said, pointed to the fact that enhanced payments did have an effect, even if it was a moderate one.

Hederman said comparing states that did or didn’t end the payments is a flawed approach. Many of the states that opted-out of $300 payments were in the South, and got hit hard by the delta variant of COVID-19.

Supply-chain issues also are hurting manufacturing, Hederman said, as well as lack of access to childcare and uneven school closures that keep parents’ home.

“It’s hard to try and have great apples-to-apples comparisons right now because of these types of issues,” he said.

It’s also possible that who got the extra payments for a year or longer also could have greatly increased their savings, he said, and that some workers could have enough money saved to wait for a better opportunity to come along - meaning the full effect of ending the payments won’t be felt until later.

Another sign it was time to end the extra payments, both Hederman and Tierney said, is that President Joe Biden and his administration didn’t try to extend the enhanced unemployment past September.

But Did the Gained Jobs Justify The Lost Benefits?

The liberal think tank Policy Matters Ohio was against cutting the benefits early. Zach Schiller, lead researcher on unemployment for the think tank, calls it a mistake. He said Ohio’s labor force, which includes people who are working and those actively looking for a job, is still 188,000 short of where it was pre-pandemic, based on federal data.

“There’s a whole number of reasons the labor force is declining,” Schiller said. “The existence of unemployment benefits is not one of them.”

Many people are retiring early or rethinking where they want to work, he said.

Schiller said the effect of cutting off the payments was “minimal” compared to the amount of money jobless Ohioans lost and didn’t spend on goods and services. He said in written testimony for the Ohio Supreme Court case that for every dollar spent on unemployment, economic output was increased by $1.61.

“It’s really clear that Mike DeWine made a mistake and cost Ohio a good deal of economic activity,” Schiller said, adding that people generally spend their unemployment checks on such things as rent, groceries and restaurants.

Both Tierney and Hederman disagreed, saying that argument assumes that unemployed people contribute more than an employed person, who would likely make more.

Tierney said the purpose of enhanced unemployment wasn’t to provide stimulus. And Hederman said: “I would also argue it’s not really the federal government’s money, because it has to come from somewhere.”

How Much Federal Money Did DeWine Opt-Out Of?

Based on information provided by the state, it’s hard to calculate just how much money would have been paid if the $300 payments continued for unemployed Ohioans through Sept. 4, as permitted under federal law and paid for by the federal government.

In the 10 weeks DeWine opted out, Ohio paid 1,666,740 individual claims, according to Bill Teets, director of communications for the Ohio Department of Job and Family Services.

If each claim was eligible for the extra $300-a-week, $500 million could have been paid out. But Teets said too many assumptions are needed to calculate that number.

Frequently people were filing claims for prior weeks or successfully appealing denied claims. The data provided to did not say if someone paid on June 15 was filing for an eligible week in February, Teets explained.

It’s also not clear how many people would have stayed on unemployment if the extra $300 payments were active. The last three weeks people were eligible for the extra money, about 250,000 received weekly payments.

The week’s ending June 12 and 19, Teets said, ODFJS paid out about $100 million weekly. That doesn’t account for someone being paid for multiple weeks.

In total, Ohio paid out $11.1 billion during the entire Federal Pandemic Unemployment Compensation program (FPUC) in both $300 payments and the $600 payments given out earlier in the pandemic.

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