Should the $600 federal unemployment benefits be extended?
Simple math tells us that the $600 handouts recently distributed by the federal government need to be slashed or entirely discontinued. The weekly payments amount to a wage of $15 (in a 40 hour work week), which is twice the federal minimum. States also pay unemployment benefits averaging $450. These payments are received on top of the 600 dollar federal payments. So, in reality, most are receiving an hourly wage of well over 25 dollars, three and a half times the federal minimum! With this ludicrous amount being tossed around by our federal government, there is no incentive for workers to re-enter the workforce. It makes more fiscal sense for many former employees to remain jobless. This hampers our return to economic normalcy in the wake of a severe economic downturn.
While not being the primary concern when the CARES act (the law that provides for the federal handouts) passed in late March, the federal deficit will, in time, become a major issue. With the unexpected shrinking of the GDP in 2020 (due to lockdown mandates) contributing to significant federal revenue loss, the additional two trillion dollar expenditure of the CARES act looks even more irresponsible. Deficit spending, while already approaching unprecedented highs, will now reach heights unheard of since FDR's New Deal. To continue to administer the unnecessary federal unemployment payments would be a tremendous macroeconomic misstep.
When talk of macroeconomics and math becomes tedious, one can turn to the individual horror stories of small businesses nationwide. There are countless fledgling or even established businesses going under due to their inability to convince their employees to come back to work. This backbone of the American economy is being snapped under the guise of generosity.
Unemployment benefits are essential even in non-pandemic times, as recipients can immediately use the funds for essential goods and services such as rent or groceries, which means more money fed back into the local community. And counter to assertions by many conservative politicians, workers on unemployment are actually more likely to both search for a job and seek out a paycheck that is comparable to their former position. Workers whose benefits have run out, on the other hand, are more likely to become discouraged, spend less time looking for work and accept a lower-paid job once they find something.
During the pandemic, these benefits become even more important as most recipients are also running into a supply problem: they want jobs, but no jobs are available due to either temporary shutdowns or permanent closures resulting from said shutdowns. As job losses currently rival those seen during the Great Depression, this further erodes the perverse incentive argument.
Beyond benefits to individuals, the extra $600 in compensation has also aided the country on a macroeconomic level. Despite high unemployment, poverty rates in April and May fell, and unemployment compensation often paid workers more than their previous employers did. This, again, meant more people able to pay bills and make necessary purchases, which allows for increased stability in local economies.
Given the program's already evident success and the fact that COVID-19 infection rates and economic shutdowns in many states are on the rise once more, why eliminate something that will continue to help these communities at a time when they most need it?
- The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment rose by 4.8 million while the unemployment rate declined to 11.1 percent in June.
- The federal minimum wage for covered nonexempt employees is $7.25 per hour.
- As of July 22, there have been 3.9 million coronavirus cases, with a total of 141,677 deaths.
- Some 25 million Americans are receiving the additional $600 federal unemployment benefit. Half of American households say they have lost income during the pandemic.
- The Congressional Budget Office found that the additional $600 resulted in 83% of recipients making more money through unemployment than they did working.