Cutting Unemployment Insurance Benefits Led to Job Gains
In mid-May, the United States embarked on a labor-market experiment. The results are in: cutting unemployment insurance (UI) benefits led to job gains.
During the Covid-19 pandemic, the federal government had provided enhanced UI benefits, initially set at an extra $600 per week on top of the regular state benefits. The top-up was later pared back to $300 per week, and scheduled to run through September. In addition to the top-ups, the federal government extended the duration of unemployment benefits and expanded benefit eligibility to workers not previously covered under the state UI systems. While these enhanced benefits may have made some sense during the lockdowns in the pandemic s initial phase in the spring of 2020, by early 2021 most states had experienced strong economic rebounds and businesses were looking to hire.
But Herr Doktor Professor Krugman said this wasn’t so! Whom am I to believe?