For working people who have been laid off during the COVID-19 pandemic, unemployment support from the federal government has been a lifeline — helping them keep food on the table and a roof over their head. It’s kept people spending money — supporting the state and local economy, too. As the number of coronavirus cases grows across Ohio, families and businesses will need all the help they can get. That’s a key reason why the extra $600 a week in unemployment benefits Congress approved last spring cannot be allowed to expire.
Though our antiquated, underfunded unemployment compensation system left large numbers of claimants waiting too long to get their benefits, more than half a million Ohioans are getting federal Pandemic Unemployment Compensation (PUC). They include restaurant workers and hotel clerks, janitors and laborers. According to the Century Foundation, the supplement to unemployment compensation (UC) is pumping more than $400 million a week into Ohio’s economy. Families can make the car payment and keep the internet on. It’s helping tenants pay the rent, avoiding an eviction crisis that would ensue. And it’s helping keep businesses afloat.
Leading economists have noted that this fiscal aid is critical when so many are out of work. That includes Jerome Powell, chairman of the Federal Reserve Bank, who said that Congress should extend enhanced unemployment insurance “in some form” after the $600 supplement expires.
In May, total UC benefits nationally were a stunning 14.6% of total wage and salary income. The Economic Policy Institute has estimated that ending the supplement would cost Ohio nearly 130,000 jobs over the next year. “The expiration of unemployment insurance would not just hurt the people directly relying on it, it would hurt all of us,” said Jason Furman, a Harvard economics professor who was President Obama’s chief economist.
Without the $600, the average weekly unemployment compensation payment in Ohio will fall to just $334. That’s only just over a third of the average wage in Ohio last year and well under the federal poverty level for a family of three.
In this unprecedented health and economic crisis, PUC is critical for families and especially for underpaid Black and Latinx workers, most of all women. Years of discrimination has blocked many Black and brown workers from accumulating the wealth or savings to cover the basics, much less emergency expenses. Women represented 52.2% of those filing initial unemployment claims in Ohio between March and May, and Blacks represented 13.8%. Women, Black and Latinx workers all were more likely to file claims than their share of the workforce.
Unemployment is likely to remain high for many months to come. The Congressional Budget Office has estimated that the U.S. unemployment rate will still be 10.5% in December. PUC needs to be extended until unemployment has fallen substantially. Setting state triggers, so that extra benefits continue when jobs are hard to get and decline gradually as the economy improves, is a smart idea.
It should be shocking to Americans that jobs pay so little that many people are actually making more money in unemployment benefits than they were in their jobs. Prior to the pandemic, six of Ohio’s ten most common jobs were so low-paid that a family of three would need food assistance to make ends meet. Even still, most people who are unemployed are eager and ready to go back to work, but there are far more unemployed workers than there are job openings.
The economic problem isn’t an undersupply of workers, it’s a lack of demand. Some of that won’t be solved until the pandemic eases and people feel comfortable going out to dine, shop, travel and be entertained—but they also need income to do so. That’s what PUC is helping to provide. A new study of the most recent hiring patterns published by the Brookings Institution found no evidence to support the view that the $600 supplement drove job losses or slowed rehiring substantially.
Unemployment benefits long have been known as one of the most effective stimulants of economic activity. They prevent families from slipping into poverty, while supporting businesses in local communities. The House already has approved an extension of this crucial backstop. The Senate must do the same.
Zach Schiller is Policy Matters Ohio’s research director. Prior to coming to Policy Matters in 2001, Zach worked for more than two decades researching and writing about the Ohio economy as a business reporter for The Plain Dealer and Business Week. His education includes a master’s degree in journalism from Columbia University and a bachelor’s degree from the University of Michigan. For Policy Matters, Zach has written about foreclosures, economic development, job growth, unemployment insurance, tax policy and other issues. He is a member of the board of managers of the Ohio Poverty Law Center. Read more Ohio Capital Journal stories here.