40,000 Rhode Islanders Will Lose $300 Per Week in September. Hit to State’s Economy? $50M a Month

Tuesday, August 10, 2021

GoLocalProv News Team

 

View Larger +

PHOTO: File

The implications of the end of the $300 a week in federal unemployment insurance on September 6 will be significant to the Rhode Island economy.

First, approximately 40,000 Rhode Islanders will lose $300 a week. And, the impact on the Rhode Island economy is the loss of as much as $50 million a month.

The benefits end when there are a record number of job openings in the United States. There were 10.1 million open jobs on the final day of June, the Labor Department said, up from 9.2 million in May.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

But the jobs open and the workers rejoining the workforce may not be a strong match for those job vacancies.

“When about 40,000 Rhode Islanders lose the additional $300 weekly benefit, there will be several effects, but not necessarily the primary one so many people assume – that most if not all of these persons will just move directly to employment. The mismatch between the number of open jobs and the number of unemployed persons is not related entirely, or even mostly, to the existence of these benefits,” Leonard Lardaro, the top economist at the University of Rhode Island, tells GoLocal.

Gary Sasse, Founding Director of Bryant University’s Hassenfeld Institute, said, ”There are no quick fixes to navigate the deadline to terminate extended benefits. However, it should be recognized that continuing them is just kicking the can down the hill. Ultimately the path forward is to improve education and skills programs, invest the $1 billion in American Rescue Funds in a business Marshall Plan and economic development initiatives -- focused on innovations and not mega real estate deals.”

 

Delta Variant Impact

Just as the dollars are ending, many public health experts are expecting one of the worst periods of the virus to hit in the next few weeks due to the impact of the spread of the Delta variant.

“We're going to see a substantial number of Rhode islanders infected,” said former Rhode Island Director of Health Michael Fine.

Fine said that the Delta variant is four times more transmissible than the Alpha version of the coronavirus that caused more nearly 2,800 deaths in the state.

Rhode Island is ranked second in the United States per capita in coronavirus cases and ranked fourth for deaths per capita.

“We've been raising concerns about over the past month to six weeks -- I think we're heading higher and higher and I'm understanding that we're likely to peak right about Labor Day, which means between now and Labor Day we have an increasing level of disease and likely, I fear, increasing hospitalizations which are too often followed by an increasing number of deaths,” said Fine.

View Larger +

URI Professor Leonard Lardaro

“While most economists suggest there is not a single explanation for the hiring challenges, extended unemployment benefits, child care, uncertainty about the Delta variant, and low wages are all factors. But there is no question that extended benefits have influenced workforce participation, making it more difficult to fill service jobs and grow the economy,” says Sasse.

“Among a list of things, unemployed persons fear contracting COVID, are re-thinking prior jobs that didn’t pay that well and ended up in layoffs, knowing they will have to deal with obnoxious persons at places of business should they return – all of these and more adversely impact non-pecuniary compensation,” said Lardaro.

"As a result, workers are seeking jobs with greater pecuniary compensation. Ironically, the proposed $15 minimum wage that seemed like a stretch just a few months ago, has become close to the effective wage for employers able to hire persons at present. Add to this the issue of whether persons who have been out of work for some time now possess sufficient skills for current jobs that pay well, the question of how many will choose to retire, and the issue of child care responsibilities and it is easy to see this issue is far more complicated than it appears," added Lardaro.

 

Return to Schools

As the benefits run out, schools are beginning and the education sector will be adding thousands of jobs from full-time and part-time workers - everyone from teachers to school bus drivers.

"Ironically, the end of the additional weekly benefits will occur at about the same time many schools resume, which by itself, will lead to a large jump in the number of persons taking jobs. It is likely that many will attribute the employment increases at that time primarily to the ending of additional UI benefits, which will be inaccurate," said Lardaro.

 

View Larger +

PHOTO: File

Weakness of the Economy Prior to COVID

Lardaro continues to emphasize how Rhode Island's economy never recovered from the impacts of the Great Recession. 

"The real question for Rhode Island concerns labor force participation, which never recovered from the Great Recession prior to COVID.  Will those on UI with the extra benefit remain in the labor force or might they even drop out as these benefits expire (some to retirement, for example)? For a very long time, Rhode Island’s 'secret sauce' for reducing its jobless rate has been a declining labor force combined with moderate (to be kind) job gains," said Lardaro.

"How all of this plays out this fall will likely say much more about the skills of our labor force than the end of the $300 benefit supplement. The good news, though, is that since Rhode Island is receiving so much money from the federal government, the macro effects of the aggregate loss of the additional benefit income will not be apparent," added Lardaro.

 

Related Articles

 

Enjoy this post? Share it with others.

 
 

Sign Up for the Daily Eblast

I want to follow on Twitter

I want to Like on Facebook