Eakinomics: Revisiting
the President’s Aid to the Unemployed
Recall that when the federal supplement to unemployment insurance benefits
lapsed on July 31, the president subsequently signed an executive order directing the
Department of Homeland Security (in particular, the Federal Emergency
Management Agency, or FEMA) and the Department of Labor to create a $300 weekly benefit for the unemployed
by administrative action. Specifically, the departments created the Lost
Wages Assistance (LWA) program that consists of $300 from disaster relief
funds administered by FEMA, with the potential for another $100 from
the state.
At the time it seemed like a Hail Mary policy pass. There did not appear to
be enough money to fund more than 5-6 weeks or so of benefits, and one
wondered if states would incur the setup costs for such a transitory
program. Now, however, AAF's Isabel Soto and Isabella Hindley have
undertaken an assessment of the LWA. What have
we learned?
Well, Eakinomics was wrong. As Soto and Hindley put it, “On August 15, one
week after the executive order was signed, FEMA announced the first four
states to be approved for the $300 additional weekly benefits: Arizona,
Iowa, Louisiana, and New Mexico. Since that announcement, an additional 45
states have applied for the LWA program. South Dakota stands alone as the
singular state that declined to participate.” In
short, lots of states pursued the federal dollars even though Soto
and Hindley report that implementation has often been a struggle.
Second, the bulk of the benefits were at the $300 level; only Kentucky and
Montana provided the $100 state supplement.
Third, most of the funding was available for 6 weeks. “Among the first to
begin doling out the LWA funds were Arizona, New Hampshire, Tennessee, and
Montana in late August, with retroactive application to the week of August
1. These states were informed that their funding would expire on September
5.” The same is true for states that got up and running later in the
summer. Thus, the bulk of participants will receive $1,800 over the 6-week
period.
Since approximately 28
million beneficiaries participated, the program disbursed a rough total of
$50 billion in federal funds, supporting household finances, but
at a lower level of labor market disincentives than the original federal
supplement. Going forward, there appears to be little appetite for
legislating a continued federal supplement, and the LWA program is out of
money, so federal unemployment aid during the pandemic may now be part of
the history books.
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