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RESEARCH The New Year’s Cliff: How the Expiration of Unemployment Benefits Will Affect Families

The New Year’s Cliff: How the Expiration of Unemployment Benefits Will Affect Families

On December 31, 9.4 million individuals are expected to lose unemployment insurance (UI) benefits in the absence of new federal legislation. The majority—9 million individuals, primarily non-traditional workers such as self-employed and gig economy workers—are currently receiving Pandemic Unemployment Assistance (PUA). Another 400,000 individuals are expected to lose Pandemic Emergency Unemployment Compensation (PEUC, a federal program that provides additional weeks of UI during the pandemic), and not be able to replace it with another benefits scheme.[1]

The expiration of unemployment benefits is likely to undermine the well-being of unemployed workers. As data from the JPMorgan Chase Institute demonstrate, this impact will extend to unemployed workers’ families and could be reflected in their spending patterns and debt payments alike. Three findings describe the likely effects of expiration.

  1. Spending is likely to drop sharply should families lose unemployment benefits as a result of the benefits cliff. Ganong and Noel (2019) observe in the pre-pandemic period that non-durable spending drops by 12 percent when jobless benefits expire. During Covid-19, we also observe that spending among jobless workers fell by 14 percent when the $600 pandemic unemployment supplement expired at the end of July 2020 (Farrell et al., 2020a). Altogether, these results imply that families experiencing unemployment could likely cut spending—including spending on items such as groceries and medical expenses—if jobless benefits expire at the end of December.
  2. Families also may fall behind on mortgage payments after losing unemployment benefits. Although unemployment usually causes increased mortgage delinquency, the pattern during the pandemic thus far has been reversed: only 5 percent of UI recipients in our sample missed mortgage payments between April and August, compared with 8 percent of the population as a whole (Farrell et al., 2020b). The most plausible explanation for this phenomenon is that generous unemployment benefits during the pandemic have enabled the unemployed to continue making mortgage payments. When families lose unemployment benefits, however, some may cease to make mortgage payments in full.
  3. It goes without saying that losing unemployment benefits impacts not just jobless workers but also their dependents. Among Chase checking account customers, we observe that one in three workers who received unemployment benefits in September 2020 has dependent children[2]though this estimate is likely a lower bound.[3] As such, changes in unemployment insurance are likely to impact the livelihoods of millions of children, as well as those of their parents.


Diana Farrell

Fiona Greig

Daniel Sullivan

Chen Zhao

Max Liebeskind