Revisiting Enhanced Unemployment Benefits and the Return to Work in the Capital Region
Last year BRAC and other pro-growth groups led a successful effort to curtail massive unemployment enhancements once COVID restrictions were lifted. How’d it all work out?
In mid-2021 there was a noteworthy debate both nationally and at the state Capitol on a provision of the American Rescue Plan passed that March: an extension of weekly $300 unemployment benefits added on top of the typical state benefit for unemployment. At the time, the provision increased weekly maximum unemployment payments from $247 to $547, an increase of about 122% over pre-pandemic benefits.
As of June, of that year, virtually all COVID restrictions had been lifted, and a life-saving vaccine was widely available. At the same time, there was incredible demand for workers as local businesses were very short-staffed – while 24,000 Capital Region residents were looking for work, there were more than 30,000 jobs open, with thousands requiring no experience and only a high school degree. Businesses in the metro wanted to reopen, but the labor shortage made that an impossibility for many. This combination led BRAC’s Board of Directors to call for the end of the enhanced payments, based on the significant data available at the time. At that point, Louisiana was the only southern state that had not ended the enhanced benefit, and it had a significant number of residents on unemployment. Louisiana and Alabama have roughly the same population, but Louisiana had 120,000+ residents on unemployment while Alabama had fewer than 80,000. Within Louisiana, Baton Rouge had an unemployment rate significantly higher than each of these states that had ended the benefit.
In response to the advocacy of BRAC and other pro-growth organizations, a compromise was made by the legislature and governor in which Louisiana would end its unemployment benefits at the end of July 2021 in exchange for the state’s weekly unemployment payment rising from $247 to $275 starting in January 2022. So, how did that work out?
As it turns out, pretty well.
The chart above tracks unemployment from January 2021 through today, and notes when Governor Edwards announced the end of the enhanced benefits. When that announcement was made, the Capital Region was experiencing a spike in unemployment, and its rate sat well above the national average. Over the next month, Baton Rouge saw twice the drop in unemployment rate as the country as a whole, and by August – the month in which the enhancements ended in Louisiana – the rate in our metro area was lower than that of the US. Baton Rouge has maintained a lower unemployment rate than the country each month since. In December of 2021, the Capital Region saw its rate drop to 3.1%, the lowest rate on record.
While a number of factors contribute to metrics like unemployment, in this instance there’s reason to believe this policy change was meaningful for a metro like Baton Rouge. The region had an ample number of jobs available, but enhanced unemployment payments were right around the average wage for work. Once it was announced that unemployment payments would fall to their normal levels of about 45% of the enhanced check, there was a dramatic back-to-work shift among residents of the region. In hindsight, this is a major success story: research and data diagnosed a problem in the economy, government was responsive to the issue, and a drastic reduction in unemployment ensued.