Over 60,000 Texans lost their “break even wage” when Federal unemployment insurance expired

Since August 2020, thousands of unemployed Texans have received an extra $300 per week in unemployment from the Federal government. In fact, when Governor Greg Abbott ended this program in Texas in June 2021, there were 197,679 people who lost this benefit. Governor Abbott’s logic was to help “unemployed Texans connect with the more than a million job openings.”

But even if there are lots of jobs available, for many unemployed people, it means taking a pay cut. Upon returning to work, many of these newly-employed people will earn less money than they did on a combination of state and Federal unemployment. Two-thirds of them are women. Almost 90% are nonwhite.

Watch a presentation of this research.

When federal unemployment insurance was introduced through the CARES Act in March 2020, it became a lifeline for over one million unemployed Texans. Normally, each state funds and operates their unemployment insurance program. However, during the pandemic, states administered an extra weekly payment directly from Federal funds.

At first, these Federal programs received bipartisan support. But by spring 2021, some governors opted out of Covid-related Federal unemployment insurance. Governor Abbott expressed that Federal insurance provided a disincentive to work, and businesses were struggling to hire because of it.

However, businesses may be struggling to hire because their wages are too low. This article explains how unemployment insurance worked in Texas during the pandemic. I examine how many unemployed Texans would return to work only to make less money than they did from federally supplemented unemployment. Then, I analyze the characteristics of this population by gender, race, age, educational level and industry.

I wanted to know who stands to lose the most from Texas ending Federal unemployment insurance. Who are the people who make less money by going back to work? 

Federal unemployment insurance explained

Although Federal unemployment insurance has been around since the Great Depression, it was largely funded by the states. However, at the onset of the pandemic in March 2020, the Federal government provided significant additional resources, which evolved over time:

  • Federal Pandemic Unemployment Compensation (FPUC) was established as a $600 weekly supplement for workers who already qualify for state unemployment insurance. 
    • Launched by the CARES Act in March 2020.
    • Renewed via executive order in August 2020, but with reduced $300 payment.
    • Extended by the Continued Assistance Act in December 2020.
    • Most recently extended by the American Rescue Plan in March 2021.
    • Ended in Texas by Governor Abbott June 26, 2021.
    • Set to expire nationally September 6, 2021. 
  • Pandemic Unemployment Assistance (PUA) extends FPUC benefits to self-employed, contract and gig workers who do not qualify for unemployment insurance in their state.
    • Launched by the CARES Act in March 2020. 
    • Ended in Texas by Governor Abbott June 26, 2021.
    • Set to expire nationally September 6, 2021. 

When these programs first expanded, there were over one million Texans receiving benefits. While that number has decreased over time, there are still about twice as many Texans on unemployment as there were before the pandemic:

These Federal unemployment benefits are in addition to existing programs run by the states. In Texas, the Texas Workforce Commission (TWC) calculates a weekly benefit amount (WBA) from the state using an employee’s past wages. Specifically, TWC looks at the employee’s highest quarterly earnings over the previous 12 months and applies the following formula:

TWC administered Federal insurance payments in direct addition to weekly benefit amounts. Therefore, if a worker’s highest quarterly earnings from the previous year were $10,000, their total weekly unemployment appeared as follows:

How many unemployed Texans will lose income upon returning to work?

In order to calculate how many unemployed Texans will make less money upon returning to their former jobs, I needed to know what their hourly wages used to be. 

However, there is no publicly available data on the former incomes of people who are receiving unemployment benefits. The state does not publish information about their former industries or demographic characteristics either.

Instead, I used two Current Population Survey (CPS) datasets to estimate the former incomes, industries and demographic characteristics of the Texans who just lost Federal unemployment insurance. 

The first dataset is the CPS basic monthly surveys from April and May 2021. This is the most recently publicly available data for unemployed Texans, and it contains demographic characteristics for 289 individuals. The second is the March 2019 ASECS, which contains both demographic data and income information for 4,538 employed workers. 

Then I used the 2019 ASECS data to estimate a multivariate regression model that predicted a worker’s hourly wage based on their industry, education level, race, gender and age. I applied the results and parameters from this model to the April and May 2021 CPS unemployed workers dataset in order to predict each worker’s former hourly wage. 

In order to calculate the number of people who would make less money by returning to work, I calculated a “break even wage.” This is the rate where workers would make the same amount of money from Federal and state unemployment as they would from their job. I assumed that everyone works 40 hours per week, 52 weeks per year. 

Using the WBA formula, I found that this “break even wage” is $15.70 per hour. Thus, anyone who made below $15.70 hourly at their previous job would have seen an overall increase in income from federally supplemented unemployment insurance.

Ending supplemental unemployment insurance disproportionately affects women and people of color.

After applying the model to the dataset of unemployed Texans in April and May, I found that 34% of unemployed workers formerly made below $15.70 hourly, and would therefore see a reduction in income upon returning to work. Projecting this proportion onto the total population of 197,679 unemployed workers who lost Federal benefits, I estimate that 67,210 Texans will see a reduction in income upon returning to work.

Two-thirds of this population are women. Despite making up only 47% of the sample unemployed population, women constitute 67% of the workers who made below $15.70 per hour. They are also significantly more likely to return to low wage jobs than unemployed men.

There is also a disproportionate representation by race and ethnicity. Hispanic/Latino people account for 44% of the unemployed population, but make up 64% of low wage workers. Black/African American people make up 22% of the unemployed population, but account for 24% of those who formerly made below $15.70 hourly.

Meanwhile, White and Asian people only make up 10% and 1% of former low wage workers respectively, despite accounting for 30% and 3% of the unemployed population. Unemployed Hispanic/Latino and Black/African American people in Texas are also far more likely to earn below $15.70 per hour upon returning to work than White and Asian people.

Additionally, younger unemployed workers were more adversely affected by the ending of Federal unemployment insurance. Workers below the age of 45 make up 87% of those who will see a reduction in their income upon returning to work.

Age Group% of Unemployed Population% of Low Wage Workers
Below 2521%43%
Above 655%0%
Sample of unemployed workers segmented by age group

Furthermore, unemployed workers with low educational attainment make up the vast majority of those who will return to low wage jobs. 71% of former low wage unemployed workers did not attend college. Unemployed workers with college degrees will likely earn higher wages upon rejoining the workforce, and be far less harmed by the expiration of Federal insurance. 

Education Level% of Unemployed Population% of Low Wage Workers
Below HS Diploma16%39%
HS Diploma or Equivalent27%32%
Some College22%25%
Associate’s Degree11%3%
Bachelor’s Degree or Higher24%0%
Sample of unemployed workers segmented by education level

Looking at this population by industry, former Accommodation & Food Services workers make up nearly a quarter of unemployed workers who will see an overall decrease in income upon returning to work. This is highly disproportionate, as only 10% of unemployed workers formerly worked in this industry. 

Industry% of Unemployed Population% of Low Wage Workers
Accommodation & Food Svc10%23%
Retail Trade15%18%
Admin & Waste Management13%17%
Transport & Warehousing9%12%
Top five former industries of unemployed workers in sample


As Texans fully return to work, the disparity in wages between genders, racial groups, age groups educational backgrounds will soon become more apparent than ever. This is also a time when the national debate about wages is reaching a boiling point. 

President Biden has actively pushed Congress to raise the Federal minimum wage from $7.25 to $15 per hour - an act that would give 3.5 million Texans a raise. The Federal minimum wage has not been raised since 2009, and millions of Americans belong to the working poor: those who spend at least 27 weeks per year in the labor force, but still live in poverty

If America is to get back to work, then it must be careful about what returning to ‘normal’ means. Millions of employed Americans were struggling before the pandemic, and they will continue to do so if nothing changes. Together, we must rethink what wages will look like in the post-Covid economy, and be aware of the communities that are disproportionately struggling. 

Ben Daecher

Ben is a student at Rice University studying Economics and Data Science. You can find his full bio on LinkedIn.