EDITORIAL: Study confirms that paying people not to work was a terrible idea

Las Vegas Review-Journal (NV)

It was obvious at the time, but a recent study should remove all doubt. The government paying people not to work is a terrible idea.

The Federal Reserve of St. Louis has released a paper on pandemic unemployment benefits, focusing on effects by age group. In spring 2020, enhanced unemployment benefits made sense. The federal government urged people to stay home. In many states, including Nevada, governors ordered certain businesses to close. The state’s unemployment rate neared a once unthinkable 30 percent.

Congress enhanced unemployment benefits. The Federal Pandemic Unemployment Compensation program boosted jobless checks by $600 a week. That’s the equivalent of $15 an hour — on top of what state programs provided.

Such generous benefits may have made sense in the early weeks of the pandemic. But people adjusted. It became obvious that COVID poised little risk to young, healthy adults. States such as Florida reopened quickly and successfully.

After vaccines became widely available, companies started to have a new problem. There weren’t enough people looking for work. In May 2021, seasonally adjusted job openings hit a record high.

But in March 2021, President Joe Biden and congressional Democrats extended the bonus unemployment benefits. The benefit dropped to $300 a week but continued through early September 2021.

As job vacancies increased, some GOP governors ended benefits early. They argued that paying people to stay home was unwise and hurting the economy. Critics dismissed the idea that the extra cash kept people out of the workforce.

This dichotomy between states provided researchers a chance to study the results.

Over three months, they found that “for every 100-person reduction in beneficiaries because of (Emergency Unemployment Benefits) program termination, employment increased by about 37 people.”

Then they broke it down by age. Among those 31 to 54, which are prime working years, employment jumped by 47.5 people per 100-person reduction. That’s massive.

Those 55 and older showed a small increase, but it could have been random. Those 18 to 30 showed a decrease, which researchers contributed to timing. Employment in that age group tends to rise in the summer and drop in the fall.

Artificially keeping people out of the workforce didn’t just add to the debt. It contributed to inflation and product shortages. It also helps explain why red states generally have lower unemployment rates than blue states. This study should also cast doubt on the wisdom of universal basic income schemes.

Unemployment insurance is supposed to help people transition from one job to another. It shouldn’t be so lucrative that its benefits artificially keep people unemployed.