Americans who have been laid off from their jobs because of the coronavirus pandemic have been able to collect an additional $600 a week in unemployment benefits on top of what they get from their state. That extra relief was part of the $2.2 trillion stimulus package known as the CARES Act.
But next month, if lawmakers fail to act, Americans who are out of work will see that $600 a week disappear from their unemployment checks.
The supplemental $600 Americans receive has been controversial, especially given that two-thirds of laid-off workers receive more money from their unemployment benefits than they did from their jobs. But at the same time, proponents of the extra $600 say that decreasing those benefits could cost the country even more jobs.
As lawmakers consider a new round of stimulus funding, there are three proposals on the table on how to replace the extra $600, two of which would allow unemployed Americans to receive additional funds on top of state unemployment benefits. But one calls for just the opposite — a return-to-work bonus.
Extending the supplemental $600 through Jan 2021
Last month, the Democratic-run House passed the $3 trillion HEROS Act, which would, among other things, extend the extra $600 federal unemployment benefit to January 2021.
The Congressional Budget Office found that if these benefits were extended through January 2021, an estimated five of every six recipients would receive more in benefits than they would from working those six months.
If these benefits were extended through January 2021, five of every six recipients would receive more in benefits than they would from working those six months, according to the Congressional Budget Office.
“If the benefit of $600 per week was extended, fewer than one in thirty recipients would receive benefits — generally the maximum amount in their state — that were less than 50% of their potential earnings,” the CBO report states.
Some have argued those generous benefits will keep people from seeking new jobs. But extending the $600 unemployment benefit would mean that Americans would have more money to spend in stores, and that could ultimately lead to lower unemployment, Heidi Shierholz, an economist at the Economic Policy Institute, a left-leaning think-tank based in Washington, D.C., said.
“It’s not true that there’s a pool of jobs out there that people would fill if they weren’t receiving unemployment benefits,” she said.
For every dollar spent on unemployment insurance, there’s a multiplier effect leading to a 1.64 increase in GDP, according to a 2008 study published by Mark Zandi, chief economist at Moody’s Analytics
Meanwhile, for every dollar spent on infrastructure projects, U.S. GDP could be expected to increase by a multiple of 1.59.
Senate Majority Leader Mitch McConnell said last month that the HEROS Act “reads like the speaker of the House pasted together random ideas from her most liberal members and slapped the word ‘coronavirus’ on top of it.” He also referred to it as a Democratic “wish-list.”
But House Speaker Nancy Pelosi said last week that she thinks Senate Republicans will “catch the spark,” and that their “their tone is changing.”
A sliding scale of unemployment benefits tied to state unemployment rates
Unlike the HEROS Act, one Democratic proposal which has bicameral support calls for additional unemployment benefits that are tied to state unemployment rates.
The proposal, known as the Worker Relief and Security Act, would allow Americans to continue to receive the additional $600 benefit for as long as the national emergency or state emergency for COVID-19 is in effect. Once the national or state emergency is terminated, jobless Americans would receive benefits based on their state’s unemployment level.
‘We continue to push for inclusion of automatic stabilizers in relief legislation, and I feel it is a top priority because it would help to prevent some of the political obstruction that unnecessarily prolonged the Great Recession.’
For instance, in states where the total unemployment rate is below 7.5%, unemployed Americans would be eligible to receive $350 in weekly benefits on top of state unemployment benefits. After 13 weeks, if they’re still unemployed, they would receive an additional $200 a week.
“The goal of the Worker Relief and Security Act is to prevent political gridlock from interfering with relief efforts by tying financial support for workers to public health and economic conditions,” said Rep. Don Beyer, a Virginia Democrat who is a sponsor of the bill and vice chair of the Joint Economic Committee.
“We continue to push for inclusion of automatic stabilizers in relief legislation, and I feel it is a top priority because it would help to prevent some of the political obstruction that unnecessarily prolonged the Great Recession.”
This plan is the most logical, said Michele Evermore, a senior policy analyst at the National Employment Law Project, an advocacy organization focused on workers’ rights.
‘Unemployment benefits should always be pegged to economic conditions.’
“Unemployment benefits should always be pegged to economic conditions,” she said. When the CARES Act passed in March, the economic impacts of coronavirus “didn’t seem like it would go on as long as it has or be as bad as it is.” So at that time, it seemed reasonable to provide the additional $600 through July. But even though 2.5 million workers went back to work last month, more than 21 million Americans are out of work, which is a sign that additional support is needed, Evermore said.
Former Federal Reserve Chairmen Ben Bernanke and Janet Yellen also support Beyer’s proposal.
“Such an approach delivers help quickly and automatically as needed, without Congress having to act, and likewise winds down extra assistance as conditions improve,” Bernanke said. “This approach would not only help the unemployed in a timely way, it would also tend to stabilize the broader economy by increasing purchasing power in times of high unemployment.”
“It’s essential to support an economic recovery,” Yellen said. “The Worker Relief and Security Act is important because it guarantees that the CARES Act’s critical unemployment benefits will remain in place for however long they’re needed.”
A return-to-work bonus
The most recent unemployment report was surprisingly positive and showed that 2.5 million Americans had gone back to work — a sign that there are more job openings as states reopen parts of their economy. Extending the $600 weekly benefit past July would disincentive Americans from returning to work if they receive more money from remaining unemployed, says Sen. Rob Portman, a Republican from Ohio.
He’s proposing a back-to-work bonus, which would provide an additional $450 a week for Americans who return to work.
“Not only is the return-to-work bonus proposal the right policy in terms of incentivizing people to safely return to work and allowing businesses to reopen, but it could also benefit the American taxpayer through significant cost savings compared to the current money we’re spending on the CARES Act unemployment benefits,” Portman said in a statement to MarketWatch.
‘We need to be sure that there’s no financial disincentive for these individuals to get back into the workforce when those jobs become available to them again.’
“Moving forward, it is critical that we have a workforce that’s ready to step into their old jobs or newly available jobs now that the economy is safely reopening,” Portman said previously.
“Given that more than 15 million unemployed Americans are categorized as ‘temporary layoffs,’ we need to be sure that there’s no financial disincentive for these individuals to get back into the workforce when those jobs become available to them again.”
Beyer said this proposal “inherently misunderstands the root cause of unemployment: a deadly pandemic, and also fails to look ahead to the looming demand crunch which will fuel new rounds of job cuts.”
The return-to-work bonus could end up incentivizing people to take “the wrong jobs,” Evermore said. “People will take the first job they get,” she said, which could mean settling for a job that pays less or one for which they’re overqualified.