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Coronavirus unemployment benefits will no longer be paid: what's next

An additional unemployment benefit of $ 600 per week will cease to be paid at the end of July. Democrats want to extend payments next year, but Republicans seem to strongly block such an extension. But lawmakers on both sides of the political spectrum have other ideas, such as linking aid to unemployment or paying a “bonus” to those who find work, writes CNBC.

Photo: Shutterstock

As a result of the coronavirus pandemic, unemployment rose to levels unseen since the Great Depression: since mid-March, nearly 41 million Americans have applied for unemployment benefits.

In normal times, state unemployment benefits replace about 40% of the average wage. The CARES law, enacted in late March and valued at $ 2,2 trillion in coronavirus assistance, added $ 600 of federal benefits to the amount that the state pays to completely replace the typical employee’s wages. This policy, which is due to end July 31, has been controversial.

Human rights activists consider extra pay an obstacle to returning to work. Senate Majority Leader Mitch McConnell recently said that any additional financial aid legislation would not increase payouts.

But Democrats see the $ 600 as a lifeline for many Americans. The House of Representatives, led by Democrats, passed a bill in May, according to which the allowance will be extended until 2021. True, labor experts believe that given the odds, extending payments of $ 600 is unlikely. However, according to them, some kind of emergency allowance will most likely be paid, given that unemployment is likely to remain high in the foreseeable future, and it will be difficult to find work.

Congressional Budget Office predicts US unemployment in the fourth quarter of this year at 11,7%. This may be lower than the April rate of 14,7%, but it will still remain higher than any rate since the Great Depression.

On the subject: Full-time work does not guarantee benefits: why not everyone can count on unemployment assistance

New Democrats Offer

One political approach would relate the size and duration of unemployment assistance to economic conditions. Such an example would be the proposal of the Democrats, the Law on the protection and safety of workers. It implies a reduction in aid as the health crisis recedes and unemployment declines. Unemployed people will continue to receive $ 600 per week during an emergency in a country or state related to Covid-19.

For example, unemployed will receive an additional $ 450 per week in states with unemployment rates above 7,5%. This assistance will be paid within 13 weeks. After that, they will receive $ 300 a week if the unemployment situation does not change.

States with unemployment levels below 7,5% will pay $ 350 a week for 13 weeks, and then $ 200 a week, until unemployment drops below 5,5%.

Bonus for job seekers

Some lawmakers use the idea of ​​a “job bonus” to encourage Americans to find a new job. Senator Rob Portman offers to pay people who return to work an additional $ 450 per week. The subsidy seeks to eliminate any financial incentives that workers may currently have while receiving increased unemployment benefits.

However, the bonus ends on July 31st, the same day the $ 600 per week benefit is scheduled to end.

According to Ernie Tedeschi, an economist at Evercore ISI, the Republicans have an idea - to pay benefits in a lump sum instead of weekly checks. For example, instead of paying an additional 10 weeks in $ 600 in benefits, lawmakers would pay $ 6000 in advance.

According to Tedeschi, in the absence of $ 600 a week, people will receive much smaller weekly unemployment checks from the state, which will encourage them to look for work, but they will have enough money to cope with the situation.

On the subject: US unemployment benefit: in what states how much do they pay

Potential obstacles

Each approach has potential obstacles. According to Tedeschi, linking benefits to conditions such as unemployment makes sense given the uncertainty of the duration of the pandemic and its economic damage. But conservatives may not like this approach: the state’s unemployment rate is unlikely to decline if unemployment assistance does not decrease, he said.

The “bonus” approach has its own problems, namely, that it sets the final date for financial assistance, which may not coincide with the improvement of the economy, experts say.

According to Tedeschi, Portman’s proposal suggests that as of July 31, jobs will be easily accessible for people, which seems unlikely given the ongoing measures for social distance and the likelihood of many businesses closing.

Bonus approaches can also force Americans to accept the first job they come across, which can hinder long-term economic recovery if people's skills and interests are not aligned with the job.

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