New Research: Failed unemployment system costs state a billion in lost economic activity

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Dave Wells is research director for the Grand Canyon Institute
Dave Wells is the research director for the Grand Canyon Institute.

The failure of Arizona’s governor and state lawmakers to address the state’s inadequate unemployment insurance (UI) system has cost the state between $1 billion and $2 billion in lost economic activity since April of this year, according to new research by the Grand Canyon Institute (GCI).

Fifty thousand or more underemployed workers have been excluded from the UI system because of the state’s harsh penalty for returning to work and low assistance cap. As a result, these workers have also been denied the weekly $600 Federal Pandemic Unemployment Compensation payment that expires this Saturday, July 25.

Arizona will continue losing more if Congress passes a follow-on weekly supplement if the state’s leaders don’t act.

This is bad news for Arizona’s battered economy as it is missing out on hundreds of millions of dollars in direct federal aid meant as a buffer from the COVID-19 pandemic.

GCI’s research findings:

Due to the state’s low unemployment benefit cap and low earnings allowance:

  • 50,000 to 110,000 Arizonans each week did not receive the $600 a week federal supplement they would have received in all other southwestern states.
  • $80 million to $230 million in added state unemployment or Pandemic Unemployment Assistance payments would have leveraged an additional $540 to $900 million in federal supplemental dollars.
  • Using a fiscal multiplier of 1.7, Arizona’s economy lost between $1 billion and $1.9 billion in economic activity since April as a result of the state’s UI system.

GCI’s research team used data from the US Bureau of Labor Statistics’ Current Population Survey to analyze how Arizona’s underemployed workers would have been impacted if the state had used UI formulas applied in Texas and Georgia over the past four months.

Read the policy paper online or as a pdf.

Read the presentation of research findings.

See the Grand Canyon Institute’s previous research on Arizona’s unemployment system and the COVID-19 pandemic at its online Research Library.

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For more information, contact:
Dave Wells, Ph.D., Research Director
602.595.1025, Ext. 2 or dwells@azgci.org

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