What will replace the 'coronavirus' unemployment benefit: three financial assistance plans
The extra $ 600 that Americans get as weekly unemployment benefits ends next month - MarketWatch offers to find out what legislators want to replace this money with.
Americans fired from work because of the coronavirus pandemic received an additional $ 600 per week in unemployment benefits beyond what they receive from their state. The money was part of a $ 2,2 trillion stimulus package known as the CARES Act.
But next month, if lawmakers do not change anything, the extra benefit will cease.
The extra $ 600 is controversial, especially given that 2/3 of those laid off receive more money from unemployment benefits than from their work. But at the same time, proponents of these payments say that reducing benefits may cost the country even more jobs.
As lawmakers are considering a new round of incentive financing, three proposals are at stake on how to replace the extra 600 dollars. Two of them will allow unemployed Americans to receive additional funds in addition to state unemployment benefits. The third is just the opposite - the bonus for returning to work.
Extension of additional assistance until January 2021
Last month, House Democrats passed the $ 3 trillion HEROES Act, which, among other things, would extend the additional unemployment benefit by $ 600 until January 2021.
According to the Congressional Budget Office, if benefits are extended until January 2021, 5 out of every 6 recipients will receive more money than if they work during these six months.
Some argue that these generous benefits will not motivate people to seek new jobs. But an increase in unemployment benefits will mean that Americans will have more money to spend in stores, and this may ultimately lead to lower unemployment, said Heidi Schierholz, an economist at the Institute for Economic Policy in Washington.
“It is not true that there are many jobs that people could fill if they did not receive unemployment benefits,” she said.
According to a study published in 2008 by Mark Zandi, chief economist at Moody's Analytics in the United States, every dollar spent on unemployment benefits leads to an increase in GDP of 1,64. Every dollar spent on infrastructure projects increases US GDP by 1,59 times.
Senate Majority Leader Mitch McConnell said the HEROS Act "reads as if the Speaker of the House had glued together random ideas from the most liberal members and added the word" coronavirus. " He also called it the Democrats Wish List.
But House Speaker Nancy Pelosi said last week that Senate Republicans would “catch the spark” and that their “tone is changing.”
Linking unemployment benefits to state unemployment
Unlike the HEROES law, this bicameral democratic proposal requires additional unemployment benefits that are tied to state unemployment rates.
This proposal, known as the Worker Assistance and Safety Act, will allow Americans to continue to receive an additional benefit of $ 600 over the duration of the COVID-19 emergency. Once a state of emergency in a country or state is ended, unemployed Americans will receive benefits depending on the level of unemployment in their state. The initiator of the bill is Rep. Don Beyer, a Democrat from Virginia.
For example, in states where the overall unemployment rate is below 7,5%, unemployed Americans will be eligible for $ 350 in weekly benefits in addition to state benefits. After 13 weeks, if they are still unemployed, they will receive an additional $ 200 per week.
The plan is the most logical, said Michel Evermore, a senior political analyst at the National Employment Bill, an organization that defends workers' rights.
“Unemployment benefits should always be tied to economic conditions,” she said. - When the Law on Patient Care was adopted in March, the economic consequences of the coronavirus pandemic did not look like it would continue to this day and everything would be as bad as it is now. Therefore, at that time it seemed reasonable to provide an additional $ 600 until July. But despite the fact that 2,5 million people returned to work last month, more than 21 million Americans are left without work. This is a sign that additional support is needed. ”
Former Federal Reserve Chairmen Ben Bernanke and Janet Yellen also support Beyer's proposal.
“This approach provides quick and automatic assistance as needed, without the need for Congressional action, and also stops providing additional assistance as conditions improve,” Bernanke said. “This approach will not only help the unemployed in a timely manner, but will also help stabilize the economy as a whole by increasing purchasing power in times of high unemployment.”
“There is a need to support economic recovery,” Yellen said. “The Employee Assistance and Safety Act is important because it ensures that critical unemployment benefits under the CARES Act remain in force for as long as they are needed.”
Return to work bonus
The latest unemployment report was surprisingly positive and showed that 2,5 million Americans returned to work - a sign that new jobs will appear as enterprises open in the states. According to Senator Rob Portman, a Ohio Republican, extending a weekly benefit of $ 600 over July will not motivate people to return to work if they receive more in the form of unemployment benefits.
He offers a return to work bonus that will give returnees an extra $ 450 per week.
“Not only is the rewarding bonus offer the right policy in terms of encouraging people to return to work safely and reopening businesses, it can also benefit US taxpayers by significantly saving costs compared to the current money we spend for unemployment benefits, ”said Portman.
“It is very important that we have a workforce ready to move to old or new jobs now that the economy is successfully opening,” he said earlier.
Director of the National Economic Council Larry Kudlow said the Trump administration is “very carefully” considering Portman’s proposal, which he will submit in full this week.
Beyer said the proposal “is fundamentally misunderstood the root cause of unemployment: a deadly pandemic, and is also unable to anticipate a looming demand crisis that will fuel new job cuts.”
The bonus for returning to work can ultimately encourage people to “make the wrong choice,” says Evermore.
“People will grab onto the first job they will be offered,” she said. “That could mean having to settle for less pay or hard work.”
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