Governor Kristi Noem has falsely claimed that she is reading all the science on coronavirus. Noem’s economic advisors evidently aren’t reading any of the science on coronavirus relief spending. Even though we have Yale research finding that the $600 unemployment relief checks that Congress authorized from April through July to support workers sidelined by the pandemic did not discourage Americans from looking for work, Noem’s yes-people say they’ve heard otherwise:
None had hard numbers to back up their statements. But several people on the Governor’s Council of Economic Advisors said Tuesday they had been told the $600 federal weekly bonus kept unemployed people in South Dakota from accepting jobs.
…Doug Sharp of Watertown, who owns several vehicle dealerships, said he had heard of other business people being affected by it.
Carla Gatzke of Brookings, an executive for Daktronics, said she had anecdotal information that some businesses felt effects of the $600.
Another comment came from Joe Santos, a South Dakota State University professor of economics who delivered a presentation to the council. “Of course that’s a disincentive,” he said [Bob Mercer, “S.D. Council’s Members Say They’ve Heard the $600 Bonus Kept Unemployed from Taking Jobs,” KELO-TV, updated 2020.08.19].
Hearsay, anecdote, and assertion don’t beat actual economic research. Santos’s own presentation to council Tuesday (ignore the incorrect date on his first page and go to page 5) show that initial and continued claims for unemployment benefits dropped right through the benefit period in South Dakota as they have nationwide.
And it may be hard for top dogs in Kristi’s inner circle to remember, but that $600 extra from Uncle Sam didn’t come with employer health insurance or pension or other ongoing benefits. That benefit also doesn’t replace the resume-boosting experience and skills one isn’t gaining while sitting out.
But let’s stick with research over our armchair assumptions. In addition to the Yale study released last month that dispels Noem’s advisors’ assumptions about the CARES Act assistance, research published in June from the University of Chicago and University of California–Berkeley found “no evidence so far in support of the view that high UI replacement rates drove job losses or slowed rehiring substantially.” Additionally, “states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries.”
Studying pre-pandemic unemployment benefits, the Chicago Federal Reserve found that folks receiving unemployment benefits look harder for work and get better job offers than those who exhaust their benefits before finding work. Once the benefits run out, folks out of work lose confidence, which is key in the job hunt, and are more inclined to take lower-paying jobs. So by that evidence-based logic, that extra unemployment benefit from the CARES Act brought double-barreled stimulus: a short-term shot of helping displaced workers sustain their spending at the grocery store, and a long-term shot of helping them look for better jobs with better pay that will help them spend more money and generate more sales tax revenue.
This research shows that a decent safety net for displaced workers makes the overall economy stronger. But South Dakota’s business leaders can’t see past their fear of having to pay workers a decent wage:
U.S. Senator Mike Rounds has said he’s heard from South Dakota business people that they felt it was unfair that they had to compete against the $600 bonus from the federal government with its borrowing power. During the economic council’s meeting Tuesday, several business people made reference to the $600 bonus [Mercer, 2020.08.19].
South Dakota’s problem is not that Congress authorized too much money to help displaced workers ride out the pandemic recession. South Dakota’s problem is business and government leaders who choose their cheap ideological prejudices over economic research.