States Have Lost $1.76 Billion After Long-Term Unemployment Benefits Lapsed

Unemployed workers waiting to enter a career fair CREDIT: AP
Unemployed workers waiting to enter a career fair CREDIT: AP

State economies have lost $1.76 billion after Congress let the benefits program for the long-term unemployed lapse at the end of last year, according to a calculation from the Democratic Policy & Communications Center (DPCC).

The federal unemployment benefits program kicked in after most state programs ended, typically around six months. There are currently about 4 million long-term unemployed workers.

In just the first week, states lost $400 million from their local economies. The DPCC projected those losses forward to arrive at its number. The loss of benefits is now impacting 1.6 million people who have been out of work for about six months or longer and used to rely on the subsidy to get by. It also impacts the 2.3 million children living with a parent who has been out of work for 26 weeks or longer. The economy as a whole is also expected to take a big hit if the benefits aren’t restored, losing as many as 240,000 jobs and 0.2 to 0.4 percent of GDP growth.

But Congress has been unable to reach an agreement to extend the program in the face of Republican obstruction. After Republican Senators filibustered an extension, objecting because it wasn’t paid for, they blocked multiple proposals as work arounds. The long-term unemployed have watched the political fighting with exasperation, with one former Republican vowing he will “never vote for a Republican again.”

Some Republicans have claimed that the benefits program makes people dependent and prevents them from getting a new job. But in fact the opposite is true: those who receive the benefits work harder to find a new job, given the program’s requirements. A natural experiment in North Carolina also sheds light on what happens to workers when they lose the benefits. After the state ended its participation in the long-term unemployment insurance program before the benefits lapsed, it has witnessed the largest labor force contraction ever, with the participation rate shrinking to a 37-year low as people possibly gave up looking for work altogether.