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NPR’s Michel Martin discusses with economist Douglas Holtz-Eakin why some Republican governors refuse to receive federal unemployment benefits for their state.
MICHEL MARTIN, ANIMATOR:
We will stay a few more minutes on this subject because more than a dozen Republican governors have announced that they will no longer participate in the federal unemployment benefits program which, as we mentioned, provides an additional $ 300 per week. federal money in addition to state unemployment assistance. These governors argue that this additional unemployment insurance, or UI, encourages potential workers to stay at home.
We wanted to know more about this prospect, so we called Douglas Holtz-Eakin. He is an economist who has held senior positions in government and politics, most notably as director of domestic and economic policy for John McCain’s presidential campaign in 2008. He is now chairman of the American Action Forum, which is a center-right think tank here in Washington, DC, and he’s written about it. And he’s with us now. Douglas Holtz-Eakin, welcome. Thanks for join us.
DOUGLAS HOLTZ-EAKIN: Thanks for having me.
MARTIN: As simple as it gets, why are Republican governors and business leaders so concerned about Federal Unemployment Insurance? What evidence supports their argument that it encourages people to stay home instead of looking for work?
HOLTZ-EAKIN: So if it wasn’t a COVID-19-related recession, if it was a normal recession without the virus, we wouldn’t be doing three things that we did just because of the virus. We would not say that you do not have to look for work to get unemployment insurance. And we wouldn’t say that the self-employed and independent contractors are eligible for unemployment insurance. And we wouldn’t give a federal benefit of $ 300 on top of that – the usual state unemployment insurance. This is the new features.
So imagine you don’t have a pandemic and you are trying to recover. This is what these governors think, we are overcoming the pandemic. Well, what do we know about unemployment insurance benefits? We know that the richer they are compared to what you earned at work – so what fraction of your regular salary or weekly earnings covers UI – the richer we are, the longer our spells of unemployment. This, in many cases, is a very rich benefit. That’s over 100% of what you usually earn for 37% of people who use UI. So that said, we expect to have long periods of uninsured for these people.
MARTIN: Well, you know the jobs numbers came out, the unemployment numbers came out last week. And a lot of people were shocked. The economy added only about 266,000 jobs when many, many more were expected. Analysts believed up to a million could have been added. Are you – are these governors pushing people back to jobs that don’t exist yet?
HOLTZ-EAKIN: Oh, I think the problem is, the jobs are there. There are currently 8.1 million unfilled jobs in the US economy. This is the largest number we have ever had. So we know there are jobs. We know that employers are trying to hire. We just haven’t been able to get people to come forward and take these jobs.
So we go through the list of usual suspects to try to understand what might be in the way. We know there are things like some people are still afraid of getting sick. They are not going to come out. Some people take care of their children or send their children to school because schools and daycares are closed. Some are afraid to take public transport. And some may just behave as they normally do when unemployment benefits are extremely rich. They’re waiting – they’re just waiting longer to get back to work.
MARTIN: Well, let’s take some of these things one at a time, if we can. I mean, we spoke with the Secretary of Labor, Marty Walsh, last week after the jobs report was released. He acknowledged that the recent data was disappointing, but he also said that the US economy has created on average more than 500,000 jobs in the past three months, securing 1.5 million jobs in total. About 330,000 of them, for example, were in the leisure and hospitality sector. You know, a lot of these jobs don’t get a lot of money. So wouldn’t that prove that workers are returning to work despite these additional federal dollars for unemployment?
HOLTZ-EAKIN: Well, what we do know is average behavior. We don’t know everyone’s behavior. And you could never look at somebody on the sidewalk and say, that’s someone who won’t go back to work because of UI. What we do know is that this is an empirical regularity. It is, you know, tested by time. You look at the data, richer benefits mean a slower return to work for people on average. We don’t know the details.
We are creating jobs, which are in the hard hit leisure and hospitality sector. This is where we lost the most jobs. This is really good news. I think what you saw was just the ambition of policymakers and Americans. They want to put the 8 million unemployed people back to work as quickly as possible. And so a quarter of a million jobs looks disappointing. Under normal circumstances, it would be an exceptional month.
And the secretary has a very good point. You should never decide things on the basis of a month’s data. Things are bouncing around a lot in the data. You want to look at these averages. Five hundred thousand is good. I think everyone would just like more.
MARTIN: Well, you know, you talked about how you can’t look at every person and sort of know what factors are driving their decision making. But let’s talk about women. I mean, women saw disproportionate job losses during the pandemic. About 2 million women did not return to the labor market after having to give up or feeling they had to give up. In April, another 165,000 women left the labor market.
So if the issue is care responsibilities, you know the schools are open, but maybe not all the time. Many daycares have closed. You know, they haven’t reopened yet, or they haven’t reopened to full capacity. If the after-school programs are not open it is not clear what will happen for the summer, how does the removal of benefits solve this problem? I mean, we know it’s a problem, so how does removing these extra perks fix this problem?
HOLTZ-EAKIN: It won’t fix that problem. I mean, there are several reasons why people couldn’t go back to work. These are certainly very legitimate reasons. And we are sure it exists, and there is no doubt about it. I think what we do know is that as the virus recedes, those activities – daycares and schools – should also reopen. Things should, I quote, “get back to normal”. And under normal circumstances, we wouldn’t have that array of additional benefits. So the governors think their states are back to normal, and we are going to get back to normal UI benefits.
MARTIN: So – well, before I let you go, you know I’m going to embarrass you. Like, what would you do? If you were – at one point you were the head of CBO, the Congressional Budget Office. You were the chief economist of the President’s Council of Economic Advisers. What would you advise?
HOLTZ-EAKIN: I always thought the 300 was too big. And I always thought it was going on too long – Labor Day. So I would start right now to reduce it so that it decreases every month and expires on Labor Day. And that way, it becomes less and less of a hindrance as we gradually get back to normal when it comes to the virus.
MARTIN: It was Douglas Holtz-Eakin, economist and president of the American Action Forum. Professor Holtz-Eakin, thank you very much for talking to us.
HOLTZ-EAKIN: Thanks.
(EXTRACT FROM SPICY KEV “SPRING RISING”)
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