Those $ 600 bonus payments are scheduled to expire on Friday. Some legislators want to extend them, but doing so would be a mistake. Unemployment pays more than work for approximately two thirds of the unemployed. Prospective workers will not only have to pay the fringe benefits, but have also made it difficult for some companies to get their employees back. Instead of extending a general benefit of $ 600, policy makers should implement a more specific partial federal correspondence with the states unemployment benefits and provide a boost to partial benefit payments for those who are rehired with hours and reduced income.
I propose a 40% federal match, which would increase a typical state benefit (which is generally between 40% and 50% of the unemployed person’s pre-dismissal earnings) to between 56% and 70% of previous earnings . In time, the federal party could disappear. This change would provide continued support to the unemployed, while eliminating the short and long-term drawbacks in the economy caused by the $ 600 benefit.
And for unemployment systems, it would be a simple change: multiply the state benefit by 1.4 instead of adding $ 600.
Admittedly, the additional $ 600 a week has injected a lot of money into the economy, so much so that an analysis by JPMorgan said the payments may contribute to “a notable 0.5% increase in personal disposable income this year.” We also saw an increase in Americans’ savings in April and May, from about 8% per month to 32% and 23%, respectively. But the $ 600 does have some damaging side effects.
Sending $ 600 to everyone who receives unemployment benefits is costing more than $ 10 billion a week, as there are more than 16 million people receiving regular state unemployment benefits and up to another 13 million who were self-employed, self-employed. part time or not. They qualify for regular benefits and are now receiving Pandemic Unemployment Assistance benefits, which qualify for $ 600.
While we’re putting the tab on the country’s credit card, U.S. debt, and interest rates are currently extremely low, future taxpayers will have to pay the bill, with interest. A partial federal match would still have costs, but by reducing the average replacement rate from 134% of workers’ past earnings to between 56% and 70%, the costs would be much lower, and yet unemployment would still provide higher benefits of what Americans usually have.
There are also immediate consequences, inequities, and abuse that come with bonus payments of $ 600.
An analysis by researchers at the University of Chicago estimated that 68% of people who now receive unemployment benefits could earn more than they did when they actually worked; and it is estimated that 20% could receive more than double their usual salary.
That’s a potentially huge problem for employers, especially if Congress extends the $ 600 benefits.
Almost two in three small businesses fear that their employees will not return to work because they do not want to lose the extra money. Generally, workers cannot continue to receive benefits while rejecting a job offer, but the CARES Act provides 11 new eligibility criteria through which people can continue to receive benefits.
The longer unemployment pays more than employment, the more expensive it will be for companies already struggling to stay open. The Congressional Budget Office explained how companies would respond to the higher costs that would result from extending the $ 600 benefits: “… Some companies set higher wages than they would without the benefits. Some companies cut their output and they raise their prices above what they otherwise would have been, and others would close. In the long term, some companies begin to use machinery and equipment that allows them to use less labor. ” Businesses that close their doors and replace workers with machines mean fewer jobs.
The $ 600 benefit is also inequitable. For example, a worker who earned $ 36,000 before being fired now collects hundreds of dollars more per week than coworkers who stayed on the job. A partial federal match would mean that people are always better off working financially.
Not surprisingly, most Americans think Congress should let the $ 600 bond expire, according to a poll by the Foundation for Government Accountability.
There are other problems too. The generous benefit and lax certification standards have caused significant fraud. Maryland found a “massive, sophisticated criminal enterprise” that resulted in fraudulent claims of more than $ 500 million. Washington state reports up to $ 650 million in fraudulent claims. Reducing the size of benefits would make fraud less lucrative, and therefore less attractive, and now that the initial push to get claims out quickly, policymakers could raise stricter certification standards.
Unemployment benefits can help close a gap, but they cannot support workers forever.
Taking money from future taxpayers to support policies that discourage people from working and eliminate jobs from the economy will not help the recovery or long-term well-being of individuals and families. But getting Americans back to work safely will.
It’s time for Congress to focus on promoting job opportunities rather than unemployment incentives and replacing rigidity with flexibility so that more Americans have job options that meet their needs.
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