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What would the impact be of paying workers to leave unemployment?

Posted at 6:28 PM, Jun 15, 2021
and last updated 2021-06-15 19:29:37-04

LANSING, Mich. (WXYZ)  — There has been talk in the legislature about getting rid of the federal $300 per week unemployment payment. However, Governor Gretchen Whitmer has a different idea.

She wants to expand how the state uses federal funds, giving it also to some Michiganders who return to work through the week of September 4th.

Governor Gretchen Whitmer’s proposal would provide the $300 in federal unemployment payments to workers taking jobs at companies that are part of the state work-share program. The goal is to get more people back in the labor market.

At Salon Edge in West Bloomfield Township, Carol Feldman says finding workers is a struggle.

“We hope people will come back to work, but again people are collecting unemployment,” said Feldman.

She says there are stylists in the state that started working out of their homes under the table due to the pandemic. They are able to continue to collect benefits.

While that happen, researchers at the University of Chicago analyzed data looking into how unemployment payments affected job searches. Their goal was to determine just how much benefits keep people from looking for a job and taking a job. They found minimal impact.

“Whenever you are trying to bring back millions of workers all at once, you are going to have these natural frictions in the labor market,” said Patrick Cooney, Assistant Director at the University of Michigan Detroit Partnership on Economic Mobility.

Cooney says while the proposed policy would help, it is important to understand factors other than unemployment insurance are keeping people out of the labor market.

“There is job mismatch out there. So if you previously worked in one position, in one sector and the opportunities are in a different one, you aren’t necessarily going to those jobs. There is wage mismatch. A lot of people are looking for a similar or better wage than they had when they exited the labor market. Child care concerns continue to be an issue for many working families,” said Cooney.

Cooney says if the policy motivates some people to get back into the labor market, it would be a win for both the worker and the business as everyone tries to rebound from the pandemic.

Cooney says it could be a smart alternative to eliminating unemployment to get rid of a perceived disincentive for work and we should learn from states that have gone that route.

“In states that have prematurely ended the federal supplement for unemployment insurance, they are planning to end extended unemployment early, you see no real pattern for increased or decreased job search. In a lot of states that are extended unemployment early you see job search trends go down, whereas you would expect them to go up,” said Cooney.

Researchers are still gathering data to understand what is leading to this.

When we shared a story about the proposed policy on social media, we learned It is a topic that gets a passionate response.

Hundreds had comments complaining that we are rewarding people for not working. Cooney says it is important to remember that the money spent will go into the overall economy.

“Expanded unemployment insurance plus the stimulus checks have stabilized our economy throughout the pandemic. The reason we are having the conversation in the first place, having such a strong recovery, and having so many employers seeking to hire workers is because we are having a healthy recovery spurred by the extent to which people have been able to upkeep their consumer spending, said Cooney.