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Extend $600 per Week Unemployment Benefits?

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KEY THEMES

Politics
Health
Economy

location

United States

KEY SOURCES

Review of Social Economy
Congressional Budget Office
Becker Friedman Institute
NBER
Economic Policy Institute
Joint Economic Committee U.S. Senate
Report on the Economic Well-Being of U.S. Households in 2018
CATO Institute
Journal of Epidemiology and Community Health
Institute of Labor Economics

WHY THIS QUESTION MATTERS: 

Unemployment benefits are typically paid at the state level. However, when the CARES Act passed in late March, additional federal funding was provided to supplement these state-level benefits with a weekly $600 federal pandemic unemployment compensation. Meaning, individuals who went on unemployment after March 27th would receive $600 each week in addition to normal unemployment benefits.

The additional benefits were aimed at mitigating the financial hardship of layoffs and worker furloughs related to COVID-19 shutdowns. The program is scheduled to end this month. Some say it should be extended, while others say it should end as planned. What do you think?


DEFINING UNEMPLOYMENT INSURANCE:

As a quick reminder, unemployment insurance helps individuals who have lost their jobs by temporarily replacing part of their wages while they look for work.  


Created in 1935, it is a form of social insurance in which taxes collected from employers are paid into the system on behalf of working people to provide them with income support if they lose their jobs.  The system also helps sustain consumer demand during economic downturns by providing a continuous stream of dollars for families to spend.

UNEMPLOYMENT DURING COVID-19:

As noted, the additional federal unemployment benefits were aimed to support individuals who have suffered financial hardship from COVID-19 related business closures or shutdowns. However, as the program's scheduled endpoint on July 31st, 2020 rapidly approaches, there are several different proposals for what to do next. We’ve outlined a few of these proposals below. 

Extend the $600 per week through the rest of the year: The House passed the HEROES Act, or the Health and Economic Recovery Omnibus Emergency Solutions Act, which extends the $600 weekly unemployment assistance through January 2021. However, the HEROES Act is unlikely to make it through the Senate. 

Extend the $600 per week based on Unemployment Rate: Senate Minority Leader proposed extending the $600 weekly assistance until the date that is 13 weeks after a state’s unemployment rate falls below 6%. Meaning it would be a phased approach that is fully dependent on state level unemployment rates.

Incentivize re-entering the workforce: Another proposal is to provide an additional $450 per week above a worker’s wage when they return to work before the $600 unemployment benefits end on July 31st. Under this proposal, the $600 benefit would not be extended. 

Today, we’ve consolidated the research to outline the pros and cons of extending the $600 per week unemployment benefits. Dig into both sides below. 

THE COMMON THREAD:

As the government implements policies, such as shutdowns, to fight the global pandemic, it also has the responsibility to craft policies to lessen the economic hardships of these policies.

FIND YOUR THREAD:

Supporters of extending the $600 weekly unemployment benefits say it’s a necessary support for employees that have lost their job due to COVID-19. Opponents say the benefits are incentivizing Americans to not return to work and the benefits will likely hurt the economy in the long run.

What do you think?

​Yes, extend the $600 per week benefits.

Reason 01

These benefits help individuals and the economy avoid a financial collapse.

  • Letting the additional $600 benefit expire would further weaken consumer demand and drive additional job losses. It would also risk a rapid increases in foreclosures. Unemployment Insurance expansions from 2008 to 2013 prevented more than 1.3 million foreclosures. Joint Economic Committee U.S. Senate

      

  • If individuals were already financially unstable before the crisis, how will they survive in the new normal? In 2018, seventeen percent of adults were not able to pay all of their current month’s bills in full. Another 12 percent of adults would be unable to pay their current month’s bills if they also had an unexpected $400 expense that they had to pay. Report on the Economic Well-Being of U.S. Households in 2018

     

Reason 02

Extending benefits may not impact individual decision to seek employment.

  • Some studies suggest unemployment insurance increases do not significantly extend the amount of time individuals are on unemployment insurance. Additionally, any extended time on UI makes the job search more efficient and increases the duration of subsequent employment as individuals are less focused on the financial hardship of unemployment and are able to find a good fit. Review of Social Economy

  • Even if individuals are incentivized to not work, couldn’t this be a good thing? There are public health incentives to stay home as much as possible during the pandemic -- people going back to work could cause spikes in cases/deaths. Allowing people to stay home as much as possible is beneficial to public health. Becker Friedman Institute

     

  • Further, there's no “pool of jobs out there” that unemployed people can fill at the moment, so the argument that unemployment insurance keeps people out of work is false in this situation, as there are no jobs to be filled. Economic Policy Institute

Reason 03

Providing unemployed individuals with extra cash is critical in the current public health crisis.

  • Unemployment Insurance decreases the transitions into self-reported ill health.The income can be invested into health improving resources and activities. This effect continues even at higher UI levels, though there are diminishing returns at higher levels. Journal of Epidemiology and Community Health


No, do not extend the $600 per week benefits.

Reason 01

We shouldn't be incentivizing people to remain out of work.

  • The Congressional Budget Office examined the potential effects of extending the $600 per week assistance and concluded, “roughly five of every six recipients would receive benefits that exceeded the weekly amounts they could expect to earn from work. This would incentivize people to stay out of work and would slow the recovery of the economy.” Congressional Budget Office 

  • We can look to the extended unemployment benefits from 2009 for evidence of this behavior. Extended unemployment insurance was instituted during the 2009 recession and removed in 2014, which incentivized people to get back to work. “In levels, 2.1 million individuals secured employment in 2014 due to the benefit cut. More than 1.1 million of these workers would not have participated in the labor market had benefit extensions been reauthorized.” NBER

Reason 02

Extending the benefits will hurt the economy in the long run.

  • The impact of extending the assistance would be positive short term but negative long term. The extension may increase demand for goods and services initially but may lead to decreased incentives to work which may lead to decreased output in the long run. Congressional Budget Office

  • Especially as businesses re‐​open, the economy will need a ready supply of workers, perhaps in industries different from where the unemployed originally worked. Further extensions will likely impede the economic recovery, which matters for a huge range of the population, unemployed or otherwise. CATO Institute

Reason 03

We should focus on policies that get individuals re-employed.

  • Instead of extending the $600 policy “a re-employment bonus providing $450 a week to both re-employed and unemployed would deliver higher welfare than the current UI supplement alone, despite leading to a slightly slower recovery of unemployment.”  Institute of Labor Economics

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