CARES Act Cliff: 7.5 Million Workers Lose Unemployment Benefits On Labor Day

With the CARES Act the U.S. government took bold policy actions so that workers impacted by this epochal pandemic would not suffer long-term economic damage.

By Andrew Stettner, Senior Fellow, The Century Foundation — The COVID-19 pandemic unleashed an unprecedented wave of unemployment impacting a wide variety of Americans, from those who lost jobs when small retail businesses closed in the wake of necessary restrictions to caregivers forced to quit work when their children’s school switched to virtual learning.

CARES Act To The Rescue

Starting with the CARES Act, the U.S. government took bold policy actions so that workers impacted by this epochal pandemic would not suffer long-term economic damage.¹

In particular, regarding unemployment insurance, the federal government initiated three major programs:

• Pandemic Unemployment Assistance (PUA), which allows traditionally ineligible workers (including gig workers) and others who lost work due to COVID-19 to receive aid.
• Federal Pandemic Unemployment Compensation (FPUC), which provided $600 per week at first, and later $300 per week, to supplement the meager unemployment benefits amount provided by states—$334 per week on average—when the pandemic-induced jobs crisis erupted in spring 2020.
• Pandemic Extended Unemployment Compensation (PEUC), which grants additional weeks of benefits to those who are still jobless when they exhaust their state benefits (which typically last twenty-six weeks).

Congress supported several other critical programs, including Mixed Earners Unemployment Compensation ($100 per week extra for those workers whose labor was split between being an employee and being an independent contractor), and 100 percent federal funding for expansion of the existing Federal–State Extended Benefits (EB) program (an extra thirteen to twenty weeks of benefits in high unemployment states) and for work-sharing benefits (partial benefits for those workers who were kept on part-time by their employer).

CARES Act and the American Rescue Plan Act

Passed in the middle of March, the American Rescue Plan Act (ARPA) continued all of these critical programs.²

• The maximum duration of PEUC benefits have been increased from twenty-four to fifty-three weeks.
• The maximum duration of PUA benefits were increased from fifty to seventy-nine weeks. Those in high unemployment states could receive up to eighty-six weeks of benefits.
• The $300 in additional FPUC benefits to all of those on unemployment also remained in place.

Taken together, these programs have delivered nearly $800 billion in assistance to families over the course of the pandemic. But this aid will soon abruptly come to an end.

Under current legislation, FPUC, PEUC, and PUA benefits can be paid through the week ending September 5, 2021, but after that, all of this federal assistance will be cut off on September 6, with no grace period. Furthermore, in an unprecedented turn of events, twenty-six states announced that they would end these 100 percent federally paid benefits early.

This controversial move — already ruled to be in violation of state law in three states (Arkansas, Indiana, and Maryland)³ and subject to ongoing litigation in other states — has somewhat distracted the nation’s attention from the far larger impact of the looming benefits cliff coming in September, which will affect all states, including the nation’s largest, where the pandemic has had the most sizable impact on the labor market.

With the U.S. economy still short 6.5 million jobs as of the end of June 2021, the end of the pandemic unemployment benefits will be an abrupt jolt to millions of Americans who won’t find a job in time for this arbitrary end to assistance.⁴

Who Will Be Hurt Most by the September 6 CARES Act Cutoff of Federal Pandemic Unemployment Benefits?

The U.S. economy is recovering from the deep wound of the pandemic jobs crisis, but millions of workers are still unemployed. Furthermore the impact of the jobs crisis has hit American workers unevenly, with some social and geographic sectors hit harder than others. Because unemployment benefit levels vary greatly from state to state, the ending of federal benefits will have a far greater impact where traditional state benefit levels are the lowest.

CASE Act – 7.5 Million Workers Will Lose All Benefits on Labor Day, September 6, 2021

As of the week of July 10, there were a total of 9.3 million Americans relying on one of the two main pandemic unemployment programs (5.1 million on PUA and 4.1 million on PEUC). As the recovery has moved forward, this total has declined steeply from 13.8 million at the end of February, and that decline is predicted to continue through the rest of the summer.

Map 1 present (and Appendix Table 1) provide estimates of how many of these workers will remain unemployed as of September 6 when the benefits will no longer be available. These estimates are based on the flows on these programs, current caseloads, and the rate in which workers have been estimated to have been exiting the programs.⁵

Based on rates of reemployment and when workers entered the program, our model predicts that there will be 7.5 million workers on these two programs when they come to an end.

This includes:

• 4.2 million workers on the PUA program. By definition, these workers are not eligible for any form of federal and state unemployment compensation, including many self-employed individuals and gig workers—and thus will be out of options once the PUA program ends. The largest group is in California (more than 1 million workers), but there are more than 150,000 individuals impacted as well in the states of Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, and Pennsylvania.
• 3.3 million workers who would lose benefits being provided through the PEUC program. California is again the largest impacted (900,000), but the states of Florida, Illinois, Massachusetts, Michigan, New Jersey, New York, and Pennsylvania also each have 125,000 workers subject to an abrupt loss of benefits. A share of workers on PEUC will be able to go back on traditional state unemployment benefits, but at a lower rate than before, if they have worked intermittently since they were first laid off in 2020.

Throughout the pandemic, workers exhausting PEUC benefits have been eligible for the Federal–State Extended Benefit program, which provides an additional thirteen to twenty weeks of benefits, but this program will be largely out of reach for jobless workers after September 6, 2021.

While there are ten high-unemployment states currently eligible for this program, six of those ten states are participating only on the condition of receiving 100 percent federal funding.

As of September 6, we predict that only Alaska, Connecticut, New Jersey, and New Mexico will be able to transition exhausting PEUC recipients onto EB, but with 50 percent state funding. Even in these states, not all workers exhausting PEUC in September will be able to go on to EB because some on PEUC now have already received EB earlier in the pandemic.

READ THE COMPLETE REPORT HERE