Along with deteriorating health conditions and an increased mortality rate, the nation also witnessed a rise in unemployment post the Covid-19 pandemic. To reduce the impact of financial blow on the masses, the US government passed the CARES (Coronavirus Aid Relief and Economic Security) Act on 27th March 2020. The CARES Act announced various unemployment benefits including the Federal Pandemic Unemployment Compensation (FPUC) which promised a weekly payment of $600 to the unemployed till 31st July 2020.

However, after an extension of this program under the American Rescue Plan Act of 2021 (ARPA), the number of weekly payments was reduced to $300, but the financial assistance was allowed to continue till 6 September 2021.

Surprisingly, as many as 23 states have recently announced their voluntary drop-out from the program. Officials who approved of discontinuing this mode of unemployment benefit argue that receiving a fixed, periodic amount would not motivate people to search for jobs.

Their claim is backed by the fact that only 9.8 million people were jobless in the United States last month but the unemployment benefits were availed by almost 16 million, in some form or the other.

The simultaneous withdrawal of multiple states from availing the federal unemployment benefits would result in 4 million people losing the weekly $300 payment. Some of them might be in dire need of this money and may be exposed to a financial crisis after this decision by their state’s government.

Although the job report for May has not yet been issued, the fact that only 266,000 jobs were added last month instead of the forecasted 1 million, makes the situation look rather gloomy coupled with the voluntary discontinuation of federal assistance by certain states.

A notice-worthy element in the entire scenario is that all the states which dropped out from availing the $300 assistance within the same week, are ruled by Republicans. As if this fact was not enough to result in hearsay amongst the suspicious US residents, a statement by economists at JP Morgan has raised a concern whether this decision on part of GOP states is made on economic grounds, or is a political move. The research team at JP Morgan has expressed in their views a greater chance of the latter possibility.

The team remarked that two factors that were used by the GOP states to justify their decision of opting out from federal unemployment benefits were:

  • Strong earnings growth
  • Tight labor market

However, it claimed that these trends were not observed in all the withdrawing states.

Furthermore, this decision will not only affect the 23 states themselves but is also likely to have an impact on the rest of the nation. For example, the jobless or under-employed individuals residing in different states would once again, be subject to receiving differing amounts of money as unemployment benefits. Since the pandemic aid program was federal, the benefits were standardized across all states. However, withdrawal from federal benefits would mean that the assistance for joblessness would now be at the sole discretion of the state government.