Democrats say that keeping unemployment benefits at greater than 100% of the average worker’s wages will help the jobless pay their bills throughout the pandemic and stimulate the economy through increased spending.
Senate Minority Leader Chuck Schumer said last week that the $600-per-week federal boost to unemployment benefits that Democrats want extended in the next coronavirus relief package had kept “millions of people out of poverty” and is “why the economy is creeping back up.”
A large majority of recipients would earn more from the benefits than from work if the pandemic unemployment boost is extended, the Congressional Budget Office estimated in June. The benefit expired at the end of July.
Democrats say that giving the unemployed more in benefits than their wages is needed to keep the economy afloat during the coronavirus-induced recession. Democrats and their allies often cite a JPMorgan Chase Institute study from earlier this month that showed the benefits led to an increase in spending.
“Workers receiving unemployment insurance have a large increase in consumption due to Unemployment Insurance, spending almost 73 cents of every $1 received, showing that the federal benefit supplement is well-targeted,” the institute said.
The same CBO report from June found that the $600 jobless boost would help keep household spending on par with pre-pandemic employment levels.
Conservatives say that paying jobless individuals more than their wages will lead many workers to avoid returning to their jobs. That disruption to the worker-employer relationship could mean long-term damage.
“Throwing government money to temporarily boost the economy, if it’s not targeted, will actually hurt us in the long run because certain jobs will be lost permanently,” said Rachel Greszler, a research fellow who specializes in labor policies at the conservative Heritage Foundation.
“There is zero rationale for paying people over 100% of their previous income through unemployment benefits. No one needs over 100% of their income to pay their bills,” Greszler said.
Those in support of giving the unemployed more than 100% of their wages through the jobless benefits say the aid has no major negative side effects for the time being, such as decreasing the labor force, but instead has had a positive effect on the economy.
“The unemployment benefits don’t just help the unemployed, but also benefit the macroeconomy overall,” said Ernie Tedeschi, an economist with macroeconomic advisory firm Evercore ISI
“The economic benefit in the short term is overwhelmingly positive, and so, we should continue the unemployment benefits at their current rate,” said Tedeschi, who served as a senior economist at the Treasury Department during the Obama administration.
Rep. Ro Khanna, a California Democrat, told the Washington Examiner that it made “sense to extend unemployment benefits so people spend, and that will lead to the unemployment rate coming down.”
Khanna said that the United States was not facing the challenge of too few people willing to work, but rather too few people with money to spend to support work.
Tedeschi said that many jobless individuals need more than 100% of their normal wages through the unemployment benefits so they can afford healthcare and other benefits that they would otherwise normally get from their job. Some individuals who work two or three jobs but are unable to do so now due to the pandemic also need to be paid more than the wages of just one job in order to pay all their bills, said Tedeschi.
Some economists say that the unemployment benefits program was not designed to pay people for anything outside of their wages.
“The amount the federal government spends on unemployment is whatever is needed to keep families afloat, but not a penny more,” said Brian Riedl, an economist at the conservative Manhattan Institute.
Riedl added that if the federal government is paying jobless individuals more than their typical wage through unemployment benefits, then it does not need to spend more on other programs such as Medicare, food stamps, and housing aid, for which Democrats also want to allocate funds.
