WASHINGTON, D.C. – In Case You Missed It, the Century Foundation recently reported on new analysis, which found that approximately 12 million workers will see their Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Extended Benefits (EB) come to an end when full federal funding expires on December 26. The report found that more than 488,000 Ohio workers will lose CARES Act benefits if Congress is unable to extend federal Unemployment Insurance (UI) programs.
As millions of Americans are set to face UI benefit cuts, U.S. Senator Sherrod Brown (D-OH) continues to call on Leader McConnell and Senate Republicans to help workers and families by extending UI programs, including the full additional $600 UI benefit which expired in July. Brown has been pressing Republicans to reinstate this critical benefit that struggling Ohio workers relied on to help pay the bills, keep roofs over their families’ heads, and put food on the table. Recently, Brown blasted Secretary Mnuchin for requesting the Federal Reserve to return CARES Act money to the Treasury.
Brown has long been supportive of efforts to provide relief to workers during the unprecedented pandemic. In September, Brown joined his colleagues in introducing the Worker Health Coverage Protection Act, a bill to protect millions of unemployed or furloughed workers from losing their health insurance by enabling them to access subsidized COBRA coverage and keep their insurance.
The Century Foundation story can be found here and below:
By: Andrew Stettner, Elizabeth Pancotti
November 18, 2020
The COVID-19 pandemic unleashed record levels of unemployment and unemployment claims, with 9.5 million Americans filing applications by the end of March alone, and millions more in the months that followed. With no end to the pandemic in sight, and a cutoff of nearly all federal unemployment benefits by year’s end looming on the horizon, inaction by Congress could mean that millions of American families will enter the New Year with little or no means of support.
Congress initially responded to this sudden wave of unemployment with an aggressive package of relief for jobless Americans, including a $600 Pandemic Unemployment Compensation (PUC) per week supplement for each benefit recipient through July 31, Pandemic Unemployment Assistance (PUA) for gig workers and others not eligible for regular benefits, as well as 100 percent federal funding for benefits for the long-term unemployed through Pandemic Emergency Unemployment Compensation (PEUC) and Extended Benefits (EB). As many as 40 million Americans (one in four workers) received a payment from one of these programs.1 Ever since the $600 per week PUC benefit expired at the end of July, the debate in Congress and attention among the media mostly focused on the value of this benefit rather than the expirations of other unemployment benefits. Under the terms of the CARES Act, both PEUC and full federal funding for EB benefits will expire on December 26, 2020. This report details the high stakes of this looming cutoff that will threaten the last economic lifeline for millions of American families.
Based on the number of people already on federal and state benefits, we estimate that 12 million workers will be on one of the two main CARES Act programs—PUA and PEUC—when funding expires on December 26. This cutoff threatens to pull the rug out from under an economy that has already seen millions of workers lose their state unemployment benefits this fall. Most workers began collecting state unemployment benefits in March or April, and since these benefits typically max out at twenty-six weeks, these workers’ benefits are already coming to an end. Three million workers already ran out of state jobless benefits in September, and based on these trends, more than 4 million more workers likely ran out by the end of October (official tallies are not released until November 20). Long-term unemployment surged in October, with the share of all jobless workers out of work for twenty-six weeks or more shot up from 19.1 percent to 32.5 percent.2 As the pandemic recession grinds on, Black workers and communities of color are at particularly high risk. While white workers were laid off at higher numbers than usual at the start of the pandemic, the share of unemployment insurance (UI) claimants who were Black soared by 40 percent from April to September—just as the benefits began to be cut off.3 The consequences of the cutoff of benefits at the end of December will be severe for these families:
The past few months have seen a steady economic recovery, but the economy is still short 10.1 million jobs as compared to before the pandemic.5 Despite exciting progress toward a COVID-19 vaccine, the pandemic is currently spreading exponentially across the United States and will continue to hamper the economic recovery. There are simply not enough jobs being created to support all of the workers running out of aid before the end of 2020. Without unemployment benefits and with savings badly depleted, families will be at high risk for food insecurity and loss of their homes, and many may be unable to pay for health care during some of the darkest days of the pandemic. The nation’s entire economy will suffer. While there are major political challenges to reaching a stimulus relief deal before the holidays, jobless workers cannot wait until January. The stakes are simply too high.
Who Will Lose Benefits at the CARES Act Cutoff on December 26, 2020?
Workers rendered jobless during the pandemic accessed various unemployment benefits through a system of state and federal programs, some of which were created specially to respond to the pandemic. Figure 1 illustrates the interactions between these critical programs for jobless workers (which are explained in detail in the next section of the report). The path that jobless workers face to access these benefits is as follows:
One particularly problematic aspect of the CARES Act was the inclusion of a hard cutoff of benefits. Individuals who have received less than thirteen weeks of PEUC or less than thirty-nine weeks of PUA won’t be able to draw down that full set of weeks,8 but would instead see their benefit payments halt before their full benefit is exhausted. Previous laws, such as the American Recovery and Reinvestment Act of 2009, had a soft cutoff, which allowed individuals already receiving benefits to continue doing so until their full term was exhausted, but stopped any additional workers from qualifying. The important difference here is that a soft cutoff creates a gentle downward slope for workers and the economy, while a hard cutoff creates a cliff.
Using data from the number of workers that accessed state UI programs earlier in 2020, and the rate of exhaustion in different states, we are able to estimate the number of workers who will still be on PEUC benefits as of December 26. As a matter of reference, 22.8 million workers entered into the state UI programs during the period from March to June 2020, and in all cases these workers would not have benefit entitlements past December 2020. A large number of layoffs were temporary, and many workers have been called back to work or found other jobs. A record 3 million workers exhausted state jobless benefits in the month of September alone. By the end of September, the number of workers continuing to claim state UI benefits had dropped to 10.8 million. Based on current trends, our model estimates that another 7 million workers will exhaust their state jobless benefits in the fourth quarter alone.
PUA is a more straightforward proposition, as those who entered the program can largely collect continuously through December, but the data has been less accurate. Unpublished Department of Labor data indicate just over 13.4 million unique individuals received PUA benefits through September 2020, but the continued claims for PUA benefits had dropped to 9.3 million workers by October 17. This sharp drop reflects not only workers finding jobs but also potentially some misreporting earlier in the pandemic.9
Table 1 illustrates the number of workers who are likely to be still receiving PEUC or PUA benefits and thus face a hard cutoff of benefits on December 26. These amounts break down as follows:
· Pandemic Emergency Unemployment Compensation (PEUC). We estimate that 4.65 million workers will still be in active PEUC benefit status as of December 26. Overall, just over 70 percent of state benefit exhaustees have made it onto PEUC benefits; Table 1 assumes this trend will continue and also bakes into the findings that some will find work before Christmas. Nonetheless, this is an extremely high number of workers being cut off of a federal extension program in a single week. As a point of comparison, 1.3 million workers were left in the lurch the last time Congress let emergency aid benefits expire at the end of 2013.10 The largest share of affected workers are in California (1.3 million), Texas (464,000), and New York (365,000), but several other states are projected to have more than 150,000 workers on PEUC facing a cutoff (Georgia, Illinois, Massachusetts, Michigan, and Pennsylvania).
· Pandemic Unemployment Assistance (PUA). While a significant share of PUA recipients will exhaust their PUA benefits (or find work) before the end of December, PUA claims are still likely to be extremely high at the end of December. We estimate that 7.3 million workers will be on PUA at the end of December, and thus lose what is likely to be their only income source. More than 1 million workers in California and New York each could see their benefits cut off, as well as more than 300,000 each in Massachusetts, Michigan, Ohio, Pennsylvania, and Texas.
· Extended Benefits (EB). Only eighteen states are projected to still have the EB program in place at the end of December, leaving many workers without additional income support after PEUC expires. These states are Alaska, California, Connecticut, District of Columbia, Georgia, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, and Washington. The loss of temporary 100 percent funding in the CARES Act for EB will cost workers in several states that have tied their state EB law to federal funding and will restrict the program back to 1980s levels: this includes states such as Kentucky and Delaware, as well as many other states where the insured unemployment rate (IUR) has dropped as workers cycle off of state UI. Of those who are predicted to have their PEUC benefits cut off on December 26, 2.9 million are expected to continue on EB. However, the states will have to contribute 50 percent of the costs of these benefits—a major financial stress at the time when state unemployment funds (and state budgets) are in distress due to the pandemic and decline in tax revenues.
As extreme as the figures above are, they underestimate the problem. Many more workers will have depleted their CARES Act benefits even before the December 26 deadline, especially when it comes those who were laid off in the earliest stages of the current economic crisis. As a matter of perspective, there were 2.8 million workers on PEUC benefits as of September 26, and these individuals will have utilized the full thirteen weeks of PEUC even before the cutoff.11 Based on exhaustions of PEUC and PUA already, and projections going forward, Table 2 outlines the state-by-state breakdown of exhaustions even before December 26. We estimate that 4.4 million workers will exhaust CARES Act benefits before December 26: 3.5 million from PEUC and 950,000 from PUA. (Notably, in Table 2, some states show PUA exhaustions before December 26 as the forty-six week PUA benefits in high unemployment states should carry all recipients to the deadline.) Some of these workers may still have EB eligibility going into January, but in states with shorter durations, such as North Carolina, workers will have likely already exhausted EB benefits even before the end of the year. For this reason, the latest stimulus package passed by the House of Representatives includes a new extension entitled Pandemic Emergency Unemployment Extension Compensation that would provide another thirteen weeks to those who exhausted either PEUC or PUA benefits.12
Figure 2 illustrates how large an impact the December 26 cutoff of CARES Act benefits will have nationwide, relative to the number of workers who had exhausted their benefits before the cutoff. Twelve million workers will be summarily dismissed from the unemployment rolls on December 26, 2020; before that, only 5.4 million workers had exhausted their CARES Act payments.
How the Programs Expiring on December 26, 2020 Wor
There are multiple benefit programs created by the CARES Act that will be expiring on December 26, 2020.13 The key provisions are outlined below.
Pandemic Emergency Unemployment Compensation (PEUC)
Federal–State Extended Benefits (EB)
Pandemic Unemployment Assistance (PUA)
The Urgent Need for Action
The stakes of the expiration of jobless benefits are high, starting first and foremost with the major consequences of long-term unemployment. Involuntary job loss has harmful effects on the outcomes of workers, and these effects are intensified when jobless spells are longer than six months. Long-term unemployment can have detrimental effects on workers’ future work opportunities, financial well-being, and health. As joblessness spells drag on, workers’ skills erode, they become discouraged, and they’re more likely to face discrimination by potential employers.27 Not only are the long-term unemployed more likely to face subsequent periods of unemployment,28 they face the risk of dropping out of the labor force indefinitely.29 The longer a bout of unemployment stretches on, the changes of finding a job dwindles and workers are more likely to receive—and accept—offers for wages lower than that of their previous job.30 The length to re-employment and negative wage effects are magnified when macroeconomic conditions are weak.31
There is a documented effect of long-term unemployment on household stability. Workers who are unemployed for substantial periods of time lower their consumption,32 draw down savings to make ends meet,33 and increase borrowing.34 A 2010 survey indicates that 24 percent of workers facing prolonged unemployment had missed a mortgage or rent payment, while other research has found that one in ten unemployed people had declared personal bankruptcy.35 In addition to effects on financial stability, long-term unemployment negatively impacts mental and physical health. Workers who are out of work for more than six months face increased rates of depression and anxiety36 and greater incidence of suicide.37 They are more likely to skip dental visits and delay necessary medical care, and less likely to refill prescriptions.38 They also face increases in mortality, which researchers have argued is potentially driven by income loss, risky health behavior, and/or loss of employer-sponsored health insurance.39 These damaging impacts of long-term unemployment are exacerbated by the loss of income support when workers exhaust their unemployment benefits. For this reason, Congress has historically provided federal support for extended benefits when large numbers of Americans are facing long-term unemployment and keeps these benefits in place until well into a cycle of recovery.40
Prolonged unemployment is more typical and more harmful for Black workers. In times of economic downturn, Black unemployment rates tend to spike earlier and recede more slowly than that of white workers.41 Between September 2018 and September 2019, when labor markets were much tighter than they are today, the average length of unemployment for Black jobless workers was 25.5 weeks—five weeks longer than for their white peers.42 Black workers were 16 percent more likely than white workers to be unemployed for at least six months during the peak of the Great Recession.43 Because long-term unemployment has lasting negative effects on earnings and labor participation, racial wealth gaps will persist. Though they are more likely to be unemployed, Black workers are less likely to get unemployment benefits.44 Eligibility restrictions and inaccessible application processes have excluded Black workers from the UI system for decades,45 and the obstacles to moving between programs after exhausting state benefits only further impairs Black workers and widens racial economic gaps.
Extended jobless benefits are also a critical piece of the macroeconomic recovery.
Unemployment insurance benefits have been proven over and over again to be one of the best dollar-for-dollar stimulus programs.46 Jobless pay takes the place of paychecks in the economy as dollars efficiently flow from workers into the pockets of local businesses struggling with the dimensions of the pandemic. The Economic Policy Institute estimated the July cutoff of the $600-per-week federal supplement to unemployment benefits may have shaved 5 million jobs off of the recovery.47 The hard cutoff of benefits for 9 million workers will shave off more than $2.5 billion in spending per week, and that gap will only grow as the limited coverage from EB also fades away.48
If benefits are cut off in December, it would be the earliest cutoff of extended benefits in any recent recession. In the previous four recessions, extended benefits were available to workers until at least three years after the start of the recession, recognizing the length of time needed to create jobs for all of those who had lost work during the downturn. In the July 1981 recession, extended benefits were available until March 1985; in the July 1990 recession, extensions kept going until February 1994; and even the mild 2001 recession included benefits through March 2004.49 During the Great Recession, up to ninety-nine weeks of benefits were available, and extensions were available to those who exhausted state benefits between December 2007 and December 2013. Critically, by this time, the share of workers on the core state benefits program had dropped substantially, to nearly half the current level, and thus the need for extended benefits had abated. Figure 3 compares the current insured unemployment rate to previous cut offs of extended benefits, and this stark difference indicates just how grave this early cut off would be to workers and the economy.
Congress has stared down major expirations of jobless benefits multiple times during the Great Recession and previous economic cycles. Policy makers have been more comfortable with enacting temporary extended benefits programs with more predictable costs rather than improving the automatic stabilizers in EB. The risk of such an approach, however, are huge cliffs like the one facing the nation on December 26. With the stakes of the benefit cutoff perhaps higher than they have ever been before, there also seems to be a grave danger that unemployed Americans could be left behind during a lame duck session taking place in the overhang of a contested presidential election. But the numbers—and families behind them—leave no excuses for inaction.
The estimates are based on reported data from states to the U.S. Department of Labor on first payments, continued claims and exhaustions for the different CARES Act programs. Using this data, the we conduct a flow analysis based on observed take up, exhaustion, and survival rates. Estimates are derived on the state level, with state exhaustion rates as a key metric (equal to the sum of exhaustions for the past twelve months divided by the sum of first payments for twelve months but with a starting period lagged by six months). Under this method, November exhaustions are projected as the exhaustion rate times the first payments for the month of May. September exhaustion rates were used but then corrected if current claims data indicate an earlier exhaustion rate is prevailing. Based on observed data, 72 percent of state exhaustions are predicted to enter into PEUC benefits during the same month they exhaust. Among those flowing onto PEUC benefits in the fourth quarter, 7 percent are predicted to leave the program each month for employment. Among those beginning PEUC before September, 70 percent of these claimants are estimated to exhaust PEUC benefits three months later (similar to the overall EUC exhaustion rate of 64 percent in 2010). Note for PEUC estimates, some states are not reporting continued claims (Florida, Georgia, and Kentucky). We use estimated values derived from their monthly disbursements for PEUC payments (ETA 2112). Thus our model predicts higher utilization of PEUC than the weekly data.
For the PUA program, month-to-month data is less accurate. Thus, the total number of first payments into the PUA program of 13.4 million was expected to produce 7.1 million exhaustions over a nine month program (a 50 percent nine-month exhaustion rate adjusted for the start times of PUA claimants). Applying this predicts that 76 percent of the 9.3 million on PUA as of October 17 would exhaust on or before December 26. This rate is used to create state-by-state estimates for those on PUA on December 26, who were already on PUA on October 17. In those states without a forty-six-week PUA program, 25 percent are assumed to have started before March 28 and thus exhaust before December 26. After October 17, initial claims into PUA for the rest of October and November are assumed to have a 50 percent payment rate before December 26.
To estimate the number of states that will trigger off by the end of December, rendering still-jobless workers when PEUC expires, ineligible for additional weeks when they exhaust their state weeks, we project the initial claims, state benefit exhaustions, re-employment rate, insured unemployment rate, and the total unemployment rate for each state the weeks between the weekly UI report released November 12, 2020.
To estimate initial claims, we take the three-week moving average of the change in total national initial claims and multiply that by the total national initial claims in the previous week. Then we take the ratio of state to national claims from the previous week and multiply it by the projected total claims of the current week. Based on our analysis of the adjusted exhaustion rate we estimate that 45 percent of workers will become re-employed within twenty-six weeks, so for our re-employment estimates, we estimate 3 percent of continuing claims are discontinued each week due to workers becoming re-employed. To project the insured unemployment rate, we take the sum of the continuing claims in the previous week and 25 percent of the initial claims in the previous week and subtract the estimated exhaustions and re-employed workers, then we divide that by the total covered employment in the state. To estimate the total unemployment rate, we follow the same method as we do for projecting initial claims.