Do jobless benefits keep people from work? Experts debate as ‘skinny’ stimulus fails
Do enhanced unemployment benefits during the coronavirus pandemic encourage Americans to hold off on going back to work? That’s the question being considered among members of Congress and experts as a proposed stimulus bill failed in the U.S. Senate Thursday.
A Republican-backed “skinny” stimulus bill — which would have, among other things, guaranteed $300 weekly unemployment benefits through 2020 — failed to pass the U.S. Senate Thursday after no Democrats voted in favor.
The proposal came after the July expiration of $600 weekly jobless benefits provided under the CARES ACT, a bipartisan economic package passed in March.
While Democrats push for an extended $600 weekly payment, many Republicans are calling for reduced benefits, arguing that the extra income is incentivizing Americans away from returning to work.
Sen. John Cornyn, a Republican from Texas, is one member of Congress who has signaled discomfort with generous jobless aid.
“We should never pay people not to work,” he said during a July congressional hearing, according to CNBC. “We should try to help people get back to work.”
Meanwhile, Senate Minority Leader Charles Schumer, a Democrat from New York, said ensuring $600 weekly unemployment benefits is the appropriate response to the economic hardship caused by the pandemic.
“We’re with the 600 [dollars],” Schumer said during a Capitol press briefing in August, according to The Hill. “[Republicans] don’t understand the crisis in the country. They don’t understand its depth. They don’t understand its breadth. They don’t understand the suffering.”
In some cases, people were making more money from their weekly unemployment checks than their usual wages. Economists at the University of Chicago found that between April and July, about 76% of workers earned more money from unemployment aid than they would have from their usual income..
This has left some Americans wondering why they should work for less if they can stay home for more.
“It’s terrible to say, but we’re all doing better now,” preschool teacher Lainy Morse, who had been out of work, told NPR in May, when benefits were still at $600 a week. “It’s hard to think about going back to work in this pandemic and getting paid less than we are right now when we’re safe and at home in quarantine.”
One employer admitted his business felt a blow when the generous unemployment benefits went into effect while trying to hire new employees, saying “it’s worse than it’s ever been,” The New York Times reported.
“Only about 50% show up for the interview,” Carl Livesay, vice president for operations of Maryland Thermoform in Baltimore, told the newspaper. “Only 50% of those that we hire actually show up for work the first day. And of those, 25% don’t make it through the first week.”
Economists from the same group at the University of Chicago released a working paper in August that questioned circumstances that could convince some people to choose unemployment over returning to work. Those scenarios included jobless benefits exceeding $600, feeling uncertainty over the temporary nature of the benefits, worrying that a work offer might expire and concerns about making less money than their former job gave them.
But for the most part, several studies agree that the unemployment benefits did not encourage layoffs to help businesses cut costs or deter people from returning to work.
One July study found that states that received more small business loans from the Paycheck Protection Program and those with more “generous” jobless insurance benefits aided by the CARES ACT “had milder (labor market) declines and faster recoveries,” according to the National Bureau of Economic Research, a private nonprofit research organization based in Massachusetts.
The team said they found no evidence that the coronavirus-related unemployment benefits “drove job losses or slowed rehiring.”
A separate group of Yale economists said if jobless supplements really did convince people to turn down employment, data “should show a significant drop in employment in the week after the CARES Act took effect,” which it does not. The numbers should also show further decreases in employment over time, which the data did not support.
“The latest results show that Americans rationally understand the greater long-term security of returning to work rather than relying on ongoing government assistance,” Sonal Desai, chief investment officer of Franklin Templeton Fixed Income, told the NYT.
