For the tens of millions of Americans receiving unemployment benefits, the additional $ 600 increase will be exhausted sooner than expected.
The weekly payments of $ 600 from the federal pandemic unemployment compensation program were implemented as part of the $ 2.2 billion CARES Act Congress approved in late March. Americans who are eligible for unemployment insurance receive an additional $ 600 in addition to what they normally claim under their state benefits. However, this push is slated to end “on or before July 31, 2020.”
July 31 falls on a Friday this year, which is a problem because states generally pay unemployment benefits on a weekly cycle that ends on Saturday or Sunday. And due to the wording of the CARES Act, that means states will end additional payments of $ 600 on July 25 or 26, rather than the last day of the month, depending on how the state’s weekly calendar is set up.
“If the benefit week ends after the July 31 limit, then the $ 600 cannot be applied to that week, and most benefit weeks end on Saturday or Sunday,” according to Michele Evermore, senior policy analyst. for the National Employment Law Project. Evermore adds that it has been unable to confirm any status that ends its weekly benefit cycle on a Friday.
According to the Department of Labor, there are approximately 33 million Americans who are still receiving unemployment benefits or waiting to be approved. So, once the additional payments of $ 600 are finished, unemployed Americans will be left with whatever unemployment compensation their state pays, the amounts of which can vary dramatically by state. Last year, the Labor Department reported that unemployment benefits replaced about 45% of a worker’s salary nationwide.
In dollar terms, the Brookings Institution estimates that the national average weekly payment was $ 387 before the coronavirus pandemic. Mississippi, for example, paid an average of $ 215 a week, while unemployment benefits peak in Arizona at $ 240 a week, which is the second lowest in the nation. Meanwhile, those in Massachusetts received $ 550 a week, on average.
“It is going to be a real shock for people, especially in states like Arizona, where the maximum benefit is $ 240 per week,” says Evermore. “I doubt anyone can pay the rent in Phoenix for that.”
Ending a $ 600 boost could have a ‘multiplier effect’ on the economy
But not only the unemployed will be affected. “I think most people think that when the $ 600 is cut that if they are not unemployed, it will not affect them. But when 30 million people no longer receive an additional $ 600, that will have a multiplier effect on the whole the economy, “says Evermore.
In fact, in a recent congressional testimony economist, Jason Furman estimated that the additional unemployment benefit of $ 600 will increase GDP by 2.8% and support just under three million jobs.
“Allow this additional benefit of $ 600 in unemployment insurance to expire in late July itself cause more job loss than was seen in any of the recessions of the early 1990s or early 2000s, “writes Josh Bivens, director of research at the Institute for Economic Policy.
Going forward, Bivens predicts extending unemployment benefits of $ 600 by the middle of next year would provide an average quarterly increase in GDP of 3.7% and an employment of 5.1 million workers.
The widespread impact of rising unemployment is likely to push federal lawmakers to extend the benefit, Evermore says. “It went from a ‘yes’ type of question to a ‘how much’ question. I think most people realize that you can’t drop $ 600 on the weekly benefit of 30 million people and that it doesn’t pass nothing, “says Evermore. But that means Congress will have to act in fact since the Senate is not scheduled to return from its recess until July 17.
“There is actually a reasonable chance that that will happen just because the economy really is pretty stable right now. Goofing around too much could be really disastrous,” says Evermore.
Check out: The best credit cards of 2020 could earn you more than $ 1,000 in 5 years
Do not miss This is when enhanced unemployment insurance, eviction bans, and other financial protections from coronavirus expire.