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As the U.S. Senate continues to stumble toward another stimulus bill, about 25 million Americans are seeing their unemployment benefits significantly reduced.
As part of emergency spending to keep the economy afloat during the early days of the coronavirus pandemic in the U.S., Congress passed enhanced unemployment benefits of an additional $600 a week. The enhanced benefits, which help both workers who lost their jobs and the economy as a whole, expired last month.
The U.S. House passed a stimulus package in May that extended the $600 a week benefit until January.
The Senate is stalled over what to do. Many senators, especially Republicans, continue to fret that the additional benefits keep the unemployed from looking for and accepting work because they are making more money through unemployment insurance (UI) than they were paid for working. Under the rules governing unemployment benefits, an unemployed worker c annot refuse to take a job simply because it pays less than they receive in jobless benefits.
Two studies released last week undermined that notion.
“We find that the workers who experienced larger increases in UI generosity did not experience larger declines in employment when the benefits expansion went into effect,” researchers from Yale University concluded. “Additionally, we find that workers facing larger expansions in UI benefits have returned to their previous jobs over time at similar rates as others.
“We find no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time,” they wrote.
Another study found that there was an increase, not a decrease, in the number of applicants per job during the pandemic. The study focused on applications on the online job application site, Glassdoor.
“Overall, our evidence suggests that employers did not experience greater difficulty finding applicants for their vacancies after the CARES Act, despite the large increase in unemployment benefits,” the researchers from the University of Pennsylvania, Federal Reserve Banks and Glassdoor wrote.
Noting that their findings may be important to ongoing public policy discussions, they wrote, “our results suggest that increasing the generosity of unemployment insurance might have increased social welfare by reducing excess competition for jobs.”
Given this information, the simplest way forward would be for Congress to resume the $600 a week in enhanced benefits. This not only helps unemployed workers, it will help stimulate the economy. Federal Pandemic Unemployment Compensation has pumped nearly $900 million into the Maine economy.
Analysis by Mark Zandi, the chief economy at Moody’s analytics, found that $1 in unemployment benefits generated $1.61 in economic activity a year later, one of the highest rates of return and far outpacing tax cuts.
“No form of the fiscal stimulus has proved more effective during the past two years than emergency [unemployment insurance] benefits,” Zandi said in testimony to the Senate Finance Committee in April.
Sen. Susan Collins has introduced legislation to continue enhanced unemployment benefits that would phase out over time. The plan, also backed by Republican Sens. Mitt Romney and Martha McSally, would pay 80 percent of laid off workers wages or a declining amount of $500 per week in August, $400 per week in September, or $300 per week in October. It also includes $2 billion in funding for states to upgrade their unemployment insurance systems.
“As Congress continues to debate additional federal relief, we must avoid a sharp drop in benefits that would cause further harm to families that have been hit hard by the pandemic,” Collins said in a press release. “The phased approach our bill creates would help individuals who have been laid off by compensating them for their lost wages in a way that does not create a disincentive to return to work if they are able to do so.”
Although not as helpful to unemployed workers or the economy as a longer term continuation of the enhanced benefits included in the CARES Act, it is more generous than the other major Republican proposal and it offers a good starting point for serious negotiations about how to help American workers in the forthcoming stimulus bill.