In less than a week, the additional $ 600 in weekly federal unemployment benefits Americans have been raising during the recession will end for an estimated 25 million unemployed adults, a fall from an “income cliff” that could jeopardize their capacity. to pay rent and other bills.
Such a sharp drop in income could be “disastrous” for many families who depend on supplemental aid to stay afloat during the coronavirus pandemic, said Michele Evermore, senior policy analyst with the National Labor Law Project. Instead, unemployed people will be forced to make ends meet with their state’s regular unemployment benefits, which generally replace less than half a worker’s salary.
Most workers will receive their final week of additional unemployment benefits this week, despite the Coronavirus Economic Relief and Relief Act, or CARES, established July 31 as the last day to pay the additional $ 600 in weekly benefits. But states that disburse their unemployment benefits in the weeks ending Saturday or Sunday will end up with the extra benefits. either the week ending Saturday July 25 or Sunday July 26.
When that happens, unemployed workers could face a cut in benefits of up to 85%, depending on the state they live in, according to an estimate by Andrew Stettner, principal investigator for the Century Foundation and an expert on unemployment policies.
Take a worker in Mississippi, who has the lowest average weekly unemployment benefit in the 50 states. After the additional $ 600 in weekly pandemic aid ends Saturday, typical worker benefits will drop from about $ 812 per week to $ 212, a decrease of about 75%.
“Who is going to spend money?”
Even in the most generous states, workers will experience a sharp decline in benefits. If they cut spending to offset the impact on their incomes, that could create a shock not only for family budgets but also for local economies.
“What is going to happen then with all that uncertainty? Who is going to spend money?” Evermore said.
Some of the 10 states where workers face the biggest drop in benefits are presidential battlegrounds, including Michigan, Ohio and Pennsylvania, Stettner said. The typical benefit will drop by about two-thirds in each of those three states, dropping to an average of $ 328 per week in Michigan, $ 364 per week in Ohio, and $ 408 per week in Pennsylvania.
Republicans in Congress are negotiating the terms of another stimulus package this week, which could include an extension of the improved federal unemployment benefits. But many Republicans have lobbied for the $ 600 benefit to be cut due to concerns that some workers earn more in unemployment than in their jobs, which some lawmakers say discourages them from returning to work.
An indication of what might be in the works comes from the United States Chamber of Commerce, a lobbying group for companies. He is pushing for a maximum of $ 400 in additional weekly unemployment benefits, which he says would replace 80-90% of a typical worker’s wages, while keeping benefits low enough to attract people to return to their jobs.
Weeks without additional benefits?
Even if Congress passes a new stimulus package by the end of July, there will likely be at least a two-week gap until those fringe benefits hit the nation’s 25 million unemployed workers, Evermore said. This is because states will need to reprogram their computers to enter the new dates for the additional payment, a significant obstacle since many trust outdated computer systems.
The profit gap could last up to four weeks if the additional payments expire this month and are then reinstated by Congress, according to Heidi Shierholz, a senior economist at the left-wing Institute for Economic Policy. It is unclear whether Congress would include a provision to pay workers retroactively for missed pay weeks.
Those urging lawmakers to extend the additional $ 600 in benefits include former Federal Reserve chiefs Ben Bernanke and Janet Yellen. At a congressional hearing on Friday, Yellen said it would be “a catastrophe” if the benefit were not extended, while Bernanke noted that the payment helps the economy as a whole.
“The other purpose of unemployment insurance is to increase aggregate demand,” he said. “People will go out and spend and that will help the economy as a whole.”
“The labor market is a disaster”
Skepticism from some economists, including Mark Zandi, chief economist at Moody’s Analytics, has grappled with the idea that extra unemployment aid provides a disincentive to return to work. His group has analyzed the relationship between unemployment aid and the nation’s unemployment rate, and has found no connection to suggest that many workers are turning down work to remain unemployed.
This is likely due to two factors: First, people who reject “proper work,” such as an offer to return to work after a leave, are at risk of losing their unemployment benefits. Second, the recovery in the labor market appears to be stalled due to a surge in the coronavirus around the states from U.S. forces to halt its reopening plans, with employers cutting job listings in recent weeks, it has found. the Glassdoor job site. That could make it harder for unemployed Americans to find a new job.
“The labor market is a disaster,” Zandi said in a recent conference call with journalists. “The job market is really in disarray, so it’s hard to argue that people are not going to go back to work in a big way because of these disincentives.”
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