Yahoo Finance's Denitsa Tsekova joined Yahoo Finance Live to break down why Alaska, Iowa, Mississippi and Missouri are cutting advanced benefits and the long-term reprecussions this will have on the state's residents.
- We have four states ending their enhanced unemployment benefits this weekend, the first of a number that are expected to do so. Now, this is the extra $300 a week that unemployed Americans are receiving. We want to bring in Denise [INAUDIBLE] for more on this. And Denise, this is going to affect a number of Americans over the coming weeks.
DENISE TSEKOVA: Exactly, yeah. We have Alaska, Iowa, Missouri, and Mississippi being the first four states opting out of those federal programs which we've been talking a lot about. The total number of workers in just those three-- those four states are 3,000 workers losing their benefits starting on Saturday.
So initially, those benefits were extended until September 6th. So for all those workers, this means 12 weeks of fewer benefits. The extra $300 are expiring. So workers just on losing the extra $300 will lose $36,000 for the time being.
But it's important to say that two really big other programs are expiring too. So the Pandemic Unemployment Assistance Program, which is providing benefits to contractors, freelancers, and all those people not covered by regular unemployment benefits are expiring. And those workers will see zero benefits starting next week. And then the Pandemic Unemployment Compensation is also expiring. So those workers will also see zero benefits starting next week.
And we spoke to quite a few people in those states. And they're in a very difficult situation. People are seeing their income dropping by 80%, up to 100% obviously if they're on one of those two programs. And they're also looking for jobs. And some of them are close to retirement, some of them are kind of in a senior position in their roles. So it's harder to return and find a good job. And even looking for kind of a lower paid service job has been very difficult throughout those times, at least to the people we've spoken to. And now they're in a difficult situation where they have to figure out their next month, next week's expenses, while trying to find a job quickly.
- And Denise, can you give us a handle on the size and the scope of-- and the scale of this issue? How many people are affected? And what does this benefit cut-off mean for them?
DENISE TSEKOVA: Well yeah, it's affecting 4.5 million workers across the country. So that's a really big wave of people that will [? suddenly ?] lose a big part of their benefits starting very soon. The total number-- the amount of benefits is $25.2 trillion of benefits that won't be paid. That's federal money that was allocated for unemployment as part of the American Rescue Plan.
So these are 25 states. And it's important to say that half of those workers-- and actually more than half-- will have no benefits very soon. So they won't even get, like, their regular unemployment benefits, which have a lower replacement rate, around 4% or 5% across the country.
And the important thing is the experts I spoke to say that this will disproportionately affect people of color. And specifically, for example, in Mississippi, 2/3 of unemployment insurance recipients are black. In South Carolina and Alabama, it's around half. While the national average is around 18%. So that benefits cut-off will affect people of color, unfortunately, disproportionately nationwide.