As lawmakers negotiate another massive coronavirus relief billA key area of debate is whether the additional $ 600 in weekly federal unemployment benefits millions of Americans are earning during the crisis are discouraging them from returning to lower-paying jobs. That has prompted some Republican lawmakers to push for a reduction in benefits, arguing that the cut will push people back into the job market and accelerate the economic recovery.
However, such concerns are wrong, some experts say. A July study by Yale economists found “no evidence” that people who recently lost their jobs choose to remain unemployed because of federal aid to the unemployed. In fact, they added: “Workers facing each other [unemployment] Expansions generally seem to be faster to get back to work than others, not slower. “
Meanwhile, Republican lawmakers and the Trump administration want to cut the $ 600 in weekly unemployment benefits to $ 200 a week, according to the Washington Post. The lower payment would provide a financial bridge until states can establish their unemployment systems to provide workers with 70% of the income they earned before losing their jobs, the Post added. The $ 600 in weekly benefits will end on July 31 after being authorized by the Coronavirus Aid, Relief and Economic Security Act in March.
The debate over unemployment benefits comes as the nation’s unemployment rate remains at its highest level since 1948, when the federal government began tracking it. With 25 million people collecting unemployment, expanded benefits have been credited with keeping many of them afloat and out of poverty: regular unemployment aid from states generally replaces only a third to a half of the average weekly wage of workers.
At the same time, the $ 600 in extra pay has become a point of conflict for some Republicans, who express concern that the generous benefit could hinder an economic rally if employers cannot find workers willing to give up their benefits for unemployment.
“We want people to go back to work,” White House economic adviser Larry Kudlow told reporters on Monday. “And we don’t want to create disincentives to work, so we are creating a technical formula that would give you 70% of the salary” before firing a worker.
Earn more without work
To be sure, some workers earn more in unemployment than they earned while working, two-thirds, to be exact. According to May research by experts from the University of Chicago, who found that one in five laid-off workers could earn up to twice their lost wages through additional unemployment pay.
However, while some people may choose to collect unemployment rather than return to work, that does not appear to be happening on a large scale. About 7 in 10 people who returned to the workforce in May had received more unemployment benefits than while working, Ernie Tedeschi, an economist at Evercore ISI, told Yahoo Money.
Adults without a job can go back to work instead of receiving benefits for one simple reason: People who reject “adequate” job offers are disqualified from receiving unemployment. That includes workers who were fired and whose employer then asks them to return to work, Yale economists say.
Their study analyzed data from Homebase, which offers scheduling and time clock software for small businesses, many of which are located in restaurants, gyms, and other sectors that were hit by the pandemic. They noted that many of these employees earn low wages, suggesting that they are the most likely to see their earnings jump from expanded unemployment benefits.
However, research indicates that higher unemployment compensation did not “discourage workers from returning to their jobs over time,” the economists wrote. “We note that our results do not necessarily imply that such responses do not exist, but suggest that expanding [unemployment] generosity has not depressed employment as a whole. “
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