Allowing the $600 unemployment benefit to expire could devastate the US economy
Editor's Note: (Annelies Goger is a David M. Rubenstein fellow at the Brookings Metropolitan Policy Program. Tracy Hadden Loh is a fellow with the Anne T. and Robert M. Bass Center for Transformative Placemaking at the Brookings Institution. Michael Gaynor is a staff writer and editor at the Brookings Metropolitan Policy Program. The opinions expressed in this commentary are their own. )
Out of the vast, $2 trillion Covid-19 relief bill Congress passed at the end of March, one seemingly tiny figure — $600 — is dominating debates over the future of federal aid. That $600 is the amount the CARES Act added to weekly unemployment benefits for workers who lost their jobs during the pandemic. And, as we near the program's expiration on July 31, it's become a sticking point for lawmakers who believe the extra money is a disincentive for Americans to go back to work.
"If you are making, say, $50,000 bucks a year, it is more advantageous to be on unemployment insurance than it is to go back to work," Sen. Rob Portman, a Republican from Ohio, told CNBC in May. The Wall Street Journal's Editorial Board recently wrote that "extending it past July 31 would be an act of sabotage as the economy tries to recover."
The real "act of sabotage," however, is just the opposite. Canceling the $600 a week increase would have dramatic, negative domino effects on the economy and the vulnerable Americans who rely on it — just as some food prices are soaring, eviction moratoriums are soon to be lifted, and new Covid-19 cases surge across parts of the country. Congress must extend the weekly unemployment benefit in order to stabilize our economy and society in this precarious moment.
The pandemic — and the disruption it's fueling — is still ongoing. Just last week, it was reported that more than one million Americans filed for first-time unemployment claims in the week prior. Unemployment insurance typically replaces only 41% of previous earnings — and catastrophically less for those who provide informal labor or make money through tips.
Cutting the additional $600 would likely have devastating effects on consumer demand. Direct relief to unemployed workers is an effective form of economic stimulus, especially because the low-wage workers most exposed to the coronavirus also have the highest propensity to consume — meaning they return more relief dollars back into the economy compared to wealthy households. People still need to pay rent and buy groceries, and an extra $600 in their pockets keeps money circulating in the economy better than more convoluted solutions.
Despite the need for different approaches for different situations, the debate over the $600 increase continues as if everyone is equally positioned to go back to work and as if employers have plenty of full-time jobs to offer. Sen. Portman is advancing the idea of a temporary back-to-work bonus worth $450 per week for returning workers, as a replacement for the $600 unemployment increase. And Rep. Kevin Brady, a Republican from Texas, is proposing a two-week benefits extension for workers after they return to work.
These proposals treat the increased benefit as if it is the only factor that a worker considers in making a decision about returning to work. The truth is that for many Americans, it's not the extra $600 a week that's keeping them home — it's a lack of child care, health risks and other facets of daily life that Covid-19 has upended.
Beyond the narrow conversation about precise dollar amounts, federal policymakers should be negotiating options for safe access to education and child care, better solutions for supporting small- and medium-sized businesses, and more investments for displaced workers in finding a new job that pays a living wage. We need to differentiate between policy solutions designed for the people we can reasonably expect to return to work and policy options for those who cannot due to health conditions (or health concerns of a household member), child care or because their job will not come back.
Furthermore, many arguments for repealing the $600 boost retread the old stereotype of a jobless worker on the government dole. At Brookings Metro, we've previously debunked some of these myths. For instance, some unemployment insurance opponents believe that a worker can simply quit his or her job and collect benefits — they can't. And if a laid-off worker is offered their job back and they choose not to return, they will lose benefits unless they have a qualifying reason to stay home. A common qualifier is likely the lack of child care, or if a worker or household member is diagnosed with Covid-19. But even workers who have a health condition that puts them at greater risk for complications from Covid-19 do not qualify to collect benefits without a doctor advising them to self-quarantine.
Meanwhile, many states continue to struggle with backlogs of unemployment insurance claims. Congress needs to reform these systems to ensure they are user-friendly, modernized, solvent and administered consistently across the country in order to address the massive delays and breakdowns undermining Americans' economic security.
Additionally, systemic racism has placed a disproportionate burden on Black, Native American and Latino communities, who are more likely to be exposed to the coronavirus on the job, unable to work remotely and face a higher risk, on average, of serious illness or death from Covid-19. Low-wage workers have less access to health care and healthy food, and are more likely to live in crowded conditions that heighten the potential for contracting the coronavirus. An extra $600 per week is a justified attempt to address these disparities.
A narrow focus on how these payments might disincentivize people from working is out of touch with the everyday realities of small businesses and workers alike in the pandemic economy. Policymakers should extend the $600 unemployment benefit increase and move on to focus on a wider range of recovery solutions.
