Tens of millions of Americans who lost their jobs due to the coronavirus pandemic have been able to raise an additional $ 600 in weekly federal unemployment benefits in recent months, in addition to the standard amount awarded by their state. For many households, the improved benefits have been a financial lifeline amid record job losses and a growing recession.
But on July 31, that enhanced benefit will end, and that could have dire consequences for millions of households.
Along with other coronavirus relief measures, the additional $ 600 in enhanced benefits has helped many Americans stay afloat, and even save more than usual, during the pandemic, and some economists consider it the “best” part of the economic response to coronavirus. The $ 600 increase has been “one of the most effective parts of the CARES Act for both humanitarian and economic reasons,” writes Heidi Shierholz, an economist at the Institute for Economic Policy, a left-wing think tank.
Ending benefits now would be a “terrible idea,” Arindrajit Dube, a professor of economics at the University of Massachusetts Amherst, said in a tweet. Many households have already spent the one-time stimulus check they received and unemployment is expected to remain high through 2021. Without the additional $ 600, benefits will return to the state standard amount, which averaged $ 378 per week in March. That’s a sudden 60% reduction in income, with no other stimulus control to turn to.
“It would cause millions of families pain, reduce economic activity and impede our recovery,” writes Dube.
Vulnerable people, Including people of color, younger and lower-income workers and women, would be most affected.
Tenants, who tend to have lower incomes and have lost a disproportionate number of jobs during the pandemic compared to homeowners, will also be particularly affected. When supplemental benefits are exhausted and tenants who are out of work receive only basic unemployment benefits, they will face an “income gap,” with many “unable to cover food, clothing, and other living expenses,” according to an analysis. of the Urban Institute.
Should the enhanced benefits be extended?
Critics of extending the $ 600 a week federal benefit say the system is easily susceptible to fraud and the amount is so high: About 40% of workers could earn more while unemployed than go back to work, according to an analysis. recent. discourages the unemployed from returning to work. The nonpartisan Congressional Budget Office recently released a report that concluded that “expanding the additional $ 600 per week would likely reduce employment in the second half of 2020, and reduce employment in calendar year 2021.”
The $ 600 a week was added to unemployment as an incentive to get people to stay home during an unprecedented “once in a lifetime” health crisis, Matt Weidinger, Rowe Fellow in Poverty Studies at the American Enterprise Institute. who studies unemployment insurance, tells CNBC Make It. Now that most states have reopened, the enhanced benefit “should expire as scheduled in late July,” or policymakers must provide another reason for it. extend, he says.
“You want to help people, but you also want the economy to recover,” says Weidinger. “The recovery will be slower and people will be less likely to recover if the bonds continue.”
Additionally, there are still other policies to help the record number of people receiving unemployment benefits, such as a provision in the CARES Act that allows people to receive benefits for 39 weeks, he says.
Tens of millions remain unemployed
Despite states reopening, approximately 21 million people remain unemployed. All of their jobs won’t reappear overnight, no matter how eager people are to get back to work. There are also serious health problems for people returning to work, as many states have done little to contain Covid-19. States that have reopened have spiked their coronavirus rates, putting workers at risk.
Drastically reducing unemployment benefits will mean less income, which means that people will have less money to spend in restaurants, shops, hairdressers and other businesses that are reopening in many parts of the country. With fewer clients, many of those who were able to return to work could lose their jobs and cause a second wave of mass unemployment.
“The money spent on continuing crucial unemployment insurance provisions will help avoid a prolonged period of high unemployment that will cause far more serious and persistent damage to the economy,” Shierholz writes.
Democratic lawmakers say the improved benefits should be extended. Under the HEROES Act, passed by the House last month and currently stalled in the Senate, workers without jobs could collect the additional $ 600 through January 31, 2021.
Republicans, however, believe that the weekly payment should end or be replaced by a “return to work” bonus, although it is unclear exactly what that would be like at the federal level. Idaho Republican Governor Brad Little recently announced a plan to offer one-time bonuses of $ 1,500 for those returning to a full-time job, and $ 750 for those returning to a part-time job. This would “level the playing field” between people who return to work and the unemployed who continue to receive the improved benefits, Weidinger says.
However, Shierholz and other economists say ending the enhanced benefit now would leave tens of millions of households without the money to cover basic living expenses and help stimulate the economy. That could worsen the recession and hinder recovery, he writes.
“We cannot disable federal aid too soon,” writes Shierholz.
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