What Happens to the Unemployed When the Checks Run Out

The expiring programs are Pandemic Unemployment Assistance, created for gig workers and others not covered by regular unemployment insurance, and Pandemic Emergency Unemployment Compensation, which extended benefits up to 13 weeks beyond their regular duration (from 12 to 30 weeks, depending on the state).

The November Census survey found that about one in four people out of work was relying on savings or selling assets to meet spending needs. One-fifth said they were still using some of the so-called economic impact payment of $1,200 that most Americans got under the CARES Act in the spring. But that is running out fast. More than one in six said they were borrowing from friends and family.

Pascal Noel, an economist at the University of Chicago, analyzed the consequences of expiring unemployment benefits with his colleague, Peter Ganong, in a study published last year. Mr. Noel noted that spending “falls substantially exactly in the month in which benefits expire, and it falls across the board.”

And that kind of shock has consequences. Mark Aguiar of Princeton and Erik Hurst of the University of Chicago have estimated that the drop in grocery spending that Professors Ganong and Noel associate with the end of unemployment benefits leads to a deterioration in diet quality: a significant decline in household consumption of fresh fruit and a jump in the consumption of hot dogs and processed lunch meat.

Jesse Rothstein of the University of California, Berkeley, and Robert Valletta of the Federal Reserve Bank of San Francisco studied what happened when unemployment insurance ended for workers who lost their jobs during the recessions of 2001 or 2007-9. Household income declines $522 a month on average, they found.

When unemployment checks run out, the poverty rate among families who received them rises from 20 percent to about one-third in the next six months, the researchers found. Other government programs, like food stamps, did not raise their income by much.

The current crop of unemployed is already in bad shape. According to the Census Bureau, for instance, by the end of November, more than one person in 10 who had not worked in the past week was relying on federal nutrition assistance, also known as food stamps, to meet needs. That is up from one in 40 in mid-July, just before the expiration of another component of the CARES Act — a $600 weekly supplement to other unemployment benefits.

Article source: https://www.nytimes.com/2020/12/14/business/economy/unemployment-benefits-economy.html