Kathleen Pender: Unless Congress acts soon, unemployment benefits will drop by $600 next week.
Unless Congress acts soon, the extra $600 a week added to all unemployment benefits since April will expire after the end of this week. Although lawmakers seem willing to extend the added benefit in some way, we don’t know how much it might be, how long it will last and how long it will take to reach an agreement.
The Heroes Act, which the Democratcontrolled House passed in midMay, would extend the $600 a week through Jan. 31. Backers say this is a crucial benefit that helps people pay for food and housing and has helped prevent the economy from collapsing.
Critics say the benefit will discourage people from going back to work — thus keeping unemployment higher than it otherwise would be — because more than half of those on unemployment are making more than they did in their previous job. Never mind that it was in
tended to do just that.
Various Republicans have suggested cutting back the benefit back to amounts ranging from $100 to $400 a week.
The extra $600, called Pandemic Unemployment Compensation, was part of the Cares Act and comes from the federal government. It was added to all unemployment benefits starting in April through weeks ending on or before July 31. In California this is the last week it will be paid unless Congress intervenes.
The $600 figure was chosen because when you add it to the average weekly state unemployment benefit nationwide (roughly $380 a week) it equals about 100% of the average wage.
The percentage of people who are making more on unemployment, with the $600, is actually more than 50% because the median wage — the point at which half of workers earn more and half earn less — is lower than the average wage.
“The income distribution is skewed. The typical or median worker earns a belowaverage wage,” said Joseph Vavra, a University of Chicago economics professor.
Vavra and two colleagues said in a research paper that 68% percent of eligible workers would get more on unemployment, with the $600, than their previous earnings, and onefifth would get at least twice what they earned before. The median unemployed worker would make 34% more than his or previous wage nationally.
In California, where the unemployment rate was 14.9% in June compared with 11.1% nationwide, “the impact would be significant if they reduced it by any amount,” said Maurice Emsellem of the National Employment Law Project.
In California, the average weekly unemployment benefit is $338, below the national average. If you add $338 to $600, “that’s only 69% of the average weekly wage,” Emsellem said. He added that $338 works out to $8.45 an hour for a fulltime job, and “nobody can live on that right now, in the midst of a COVID crisis.”
The Cares Act also authorized Pandemic Unemployment Assistance for selfemployed and other people ineligible for regular state unemployment, and a 13week extension of regular state benefits, called Pandemic Emergency Unemployment Compensation. Those two programs expire at the end of this year.
Heidi Shierholz, senior economist with the Economic Policy Institute, estimated that at least 25 million Americans are receiving the extra $600 a week, and that in turn is supporting 5 million jobs.
“If we cut off the extra $600, for the vast majority, those jobs are just not available,” she said.
Shierholz concedes that giving everyone a flat $600 — regardless of their prior earnings, occupation, industry or state — “is not ideal.” But “because we have so underinvested in our unemployment insurance system, they were not capable of doing something that was more tailored to individuals.”
With vast swaths of the economy still closed and coronavirus surging in many states, some Republicans appear willing to extend that benefit at some reduced level.
In April, Sen. Lindsey Graham said he and fellow South Carolina Republican Sen. Tim Scott would extend the $600 benefit boost “over our dead bodies.” On Wednesday, he said, “I think there needs to be a federal benefit continued, but it needs to be readjusted, because it’s creating a disincentive to go back to work. They’re talking about 70%, something like that.”
On Thursday, President Trump said he originally opposed the extra $600 but called it “a real lifeline.” He added, “Now we’re doing it again. They’re thinking about doing 70% of the amount ... so that people are going to want to go back to work, as opposed to making so much money that they really don’t have to. We were very generous with them.”
A White House spokesman clarified that Trump was referring to “70% of wage replacement,” but did not say what 70% would amount to.
To what extent the extra $600 is discouraging people from working is unclear. Ernie Tedeschi, head of fiscal analysis with Evercore ISI and a former Treasury economist under President Obama, said that about 70% of unemployment recipients who went back to work in June were making more on unemployment than their prior wage, “and yet still returned to work.”
People know “that we are in for an extended period of high unemployment,” Shierholz said. “Trading a permanent job offer for temporary benefits ... is an incredibly risky move.”
When business owners talk about not being able to hire back workers because they’re making too much on unemployment, “I don’t know what planet they’re on,” said Candace Combs, who coowns the InSymmetry Spa in San Francisco’s Mission District with her brother. She had to lay off her 15 full and parttime employees when the shelterinplace orders were issued in March. The spa, which does massages and facials, has not been allowed to reopen. “My employees need that $600,” she said.
Combs also relies on the extra $600 to pay her share of the rent on the house she shares with her partner.
Not being able to hire back workers “is the least of my concerns,” she added. Even if a vaccine were discovered tomorrow, “it’s going to take a while to build this back up” as consumer confidence improves. “We will come back at 25%, then 50%. So who am I going to hire?” At first it will be her and her brother and an esthetician. As business improves, “I’ll take whoever wants to come back.”
Emsellem said his big concern is that Congress won’t act before next week “and there is going to be a lapse in benefits. If they drag this out more than a week or two, that’s the big challenge for California and other states. They will have to stop the benefits, reprogram (their systems), ask everyone to recertify again for all the weeks they missed. Any extra burden on the state agencies can create a big hassle for everybody.”
He would also like to see the U.S. Department of Labor issue clearer guidance on the conditions under which a worker could turn down a job and still qualify for unemployment benefits.