Reckoning coming as fed unemployment benefits ending

For 300,000 Mass. residents, special programs expire at week’s end

MORE THAN 300,000 Massachusetts residents will lose federal unemployment insurance benefits at the end of this week, and no one is sure what that will mean for them or the state.

The federal government is pulling the plug on the benefits, which include an extra $300 a week, extra weeks, and a special program for gig workers and the self-employed. The end of the programs means the loss of hundreds of millions of dollars of income for the 300,000 Massachusetts residents and the state’s economy.

Many employers, particularly restaurants and retailers, think the shutdown of the federal programs will spur many of those benefitting from them to return to work. The employers believe the federal benefits are too generous, and have allowed people to make more money sitting at home than working.

Jon Hurst, president of the Retailers Association of Massachusetts, said in an email that the elimination of the federal unemployment benefits should help with current labor shortages. He said the maximum weekly benefit in Massachusetts is $855, the highest in the country and nearly three times as high as what other states offer. With the extra $300 from the federal government, he said, the maximum benefit in Massachusetts is nearly $1,155, which works out to $28 an hour for a 40-hour week. He said small businesses cannot match that.

“Small businesses need employees and good service to keep consumers coming back, otherwise they just keep spending on their smartphone as they have since March 2020,” Hurst said. “And it isn’t just the local seller. It’s the manufacturer, distribution network, etc.  Supply chain issues due to COVID, labor shortages, higher labor and energy costs, are all combining for very high inflation. The shorter the inflation surge, the better for everyone, including those currently on UI.”

State employment data indicates there are plenty of jobs out there. Unemployment in Massachusetts was down to 4.9 percent in June, with 237,000 jobs currently unfilled – almost 70,000 more than there were before the pandemic.

But there are indications that the end of the federal unemployment benefits may not lead to a huge surge in employment. More than 20 states, most of them led by Republican governors, previously moved to end some or all of the federal benefits in a bid to encourage people on unemployment to return to work. Some academic studies suggest relatively few of those workers have found jobs.

Arindrajit Dube, a UMass Amherst economist, coauthored one study earlier this month that looked at anonymized bank transaction data of individuals in states where the benefits ended and states where the benefits were retained. What the study discovered was that only one of every eight workers who lost their federal benefits in April had a job by the beginning of August. The net result was a big loss of money being pumped into that state’s economy – for every dollar lost in unemployment benefits there was only a 7-cent increase in earnings.

“This is a pretty modest increase in employment for a substantial reduction in spending,” Dube said.

The question remains: What’s holding people back from jumping into the workforce?

“I don’t think we understand it fully,” said Dube. “I think there’s a bunch of things going on.”

The scarcity and the high cost of child care, as well as uncertain schedules at schools, have prevented many parents from re-entering the workforce. Fear of COVID is a factor for some. But there also may be some sort of COVID realignment taking place – the combination of the disease and the expanded federal benefits have given many people an extended opportunity to rethink their careers.

Some are abandoning their careers all together. Others want to move in a different direction or find themselves in a mismatch situation.

For example, data released by the state indicate there is a clear mismatch in the food preparation and serving business, with 11,000 jobs available in that category and 34,000 people from that industry unemployed. Approximately 27,000 of them have been taking advantage of the federal unemployment insurance programs. Some will find jobs in the food preparation and serving business when the federal programs comes to an end at the end of the week, but most of them won’t.

The Baker administration sees a huge need to retrain workers for professions where demand currently outstrips supply, including health care and computer and mathematical occupations. The administration wants to use $240 million of the state’s federal relief funds for a retraining effort the likes of which the state has never seen before. The goal is to retrain 52,000 people over a three-year period.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Quick action by Beacon Hilln on the Baker administration’s proposal is unlikely, given the Legislature’s deliberative pace. Even once a retraining effort is launched, however, it will take time to get it up and running and for workers to go through it. State officials say white workers will probably be the first to find new jobs, with women lagging 18 months behind, and Blacks and Latinos two years behind.

Massachusetts is in a good position with relatively low unemployment and plenty of open jobs. But, given the mindset of most people who are about to see their federal unemployment benefits disappear, it’s likely to take a long time for the system to balance itself out.