Lawmakers are eyeing changes to the $600 payment boost to unemployment benefits to alleviate the incentives leading some workers to choose to remain jobless.
Adding to the urgency is that business owners with granted Paycheck Protection Program loans are having a hard time rehiring furloughed workers because of the unemployment benefit. Yet, if they cannot get those workers back, they risk the loan not being forgiven.
Lawmakers hope to address the problem, which stems from the fact that the increased benefits mean that many would lose money, either by reducing the payment or providing workers with a bonus for staying on the job.
Republican Sen. Mitt Romney from Utah went the bonus route. He has proposed “Patriot Pay,” which would provide essential workers earning less than $50,000 a temporary bonus of up to $12 per hour for May, June, and July, which are the remaining months of the $600 payment if unemployment benefits are not extended.
“Health care professionals, grocery store workers, food processors, and many others — the unsung patriots on the front line of this pandemic — every day risk their safety for the health and well-being of our country, and they deserve our unwavering support,” the senator said when announcing his proposal.
Under Romney’s bill, Congress and the Department of Labor would designate the business sectors that would be deemed essential. To receive the bonus, eligible employers would certify that an employee worked in conditions that increased his or her potential COVID-19 exposure.
Romney told the Washington Post on May 1 that it was “not fair” that essential workers can earn less than those receiving unemployment benefits.
On average, unemployment benefits across the country were $385 per week in February 2020, according to the House Ways and Means Committee. When combined with the added benefit, jobless workers receive nearly $1,000 a week. The median salary for a grocery store cashier, an essential worker, is roughly $600 a week, according to Salary.com.
Doug Rike, a 25-year-old cook who worked at the Upland Brewing Co. in Bloomington, Indiana, receives more money collecting unemployment benefits than he earned at his job.
Karen Harned, executive director of the National Federation of Independent Business’s Small Business Legal Center, said a business owner recently angered former employees when he informed them that they were rehired.
“It was total anger, like, ‘What do you mean? We have unemployment,’” she said. “We have a number of members call us or email us and say they have offered their employees to come back, and they said, ‘No, I want to keep my unemployment.’ … We are definitely hearing stories that this is real,” she said.
Lawmakers such as Rep. Tom Reed, a Republican from New York, seek to lower the payment. He told the Washington Examiner that the $600 amount is more than most people in his western New York district earn.
“Our median salaries are around $30,000. If you do the $600 per week, that is equivalent to a gross wage of $72,000, plus or minus. That type of wage in western New York is not the norm. That is way above our median salary,” the congressman said, adding that “the $600 financial incentive to stay out of the workplace needs to be dealt with.”
The CARES Act that was enacted in March provided an additional 13 weeks of unemployment benefits, as well as an extra $600 weekly payment that runs through July 31. It is a flat payment that does not take into account former salary levels or whether the worker was part-time or full-time.
The problem with the payment is that it is simply too lucrative, said Doug Holtz-Eakin, president of the American Action Forum, a conservative think tank.
“It’s too big. No question,” he said. “It’s quite clear that the work incentive has been very badly damaged, as it is way too generous.”
Holtz-Eakin said unemployment benefits must do two things: be large enough to maintain the worker’s standard of living while being low enough to provide an incentive to return to work. The $600 payment could fail to accomplish the second part.
“It’s not going to work from a work incentive perspective,” he said.
Sen. Ron Wyden may not agree that the $600 payment is too much, but he does seek to scale it back after its July 31 expiration by tying it to improvement in the economy. Under his plan, every time a state’s three-month unemployment rate average falls 1%, the payment is reduced by $100 and eliminated after the jobless rate falls below 6%.
“The benefit should continue based on the state of the economy. As the state’s unemployment rate falls, the boost in benefits would reflect that, and it would fall as well,” said the Democratic senator from Oregon.
Other lawmakers seek to extend the benefit as it is currently written but tie its end to a specific event.
Rep. Don Beyer, a Democrat from Virginia, worked with Democratic Sens. Jack Reed of Rhode Island and Michael Bennet of Colorado on a plan that extends the $600 payment until 30 days after President Trump ends his emergency declaration on the coronavirus, which was issued on March 13.
“My colleagues and I feel a deep sense of urgency to not only get the American people the help they need during this pandemic but also to make sure it is sustained for as long as they need it,” Beyer said when introducing his plan.
House Ways and Means Chairman Richard Neal, a Democrat from Massachusetts, said he thinks the provision will be extended as is. In a recent interview, he called the $600 payment a “handsome benefit that is likely going to have to be extended.”
Sen. Tim Scott, a Republican from South Carolina, during the Senate debate over the CARES Act in March, attempted to cap unemployment benefits at 100% of an individual’s salary to avoid the current situation in which jobless benefits outpace wages. The measure failed by a 48-48 vote.
In a statement, the senator’s office told the Washington Examiner that the amendment was intended to stop what is currently playing out in the job market when it comes to the $600 payment.
“Senator Scott supports expanded unemployment benefits, but Congress shouldn’t create a perverse incentive not to work. This hurts our economy and our small businesses, and is exactly what Senator Scott was hoping to avoid with his amendment,” the statement reads, adding that “everyone should be focused on how to re-open the economy and safely get Americans back to work.”
