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

Before the pandemic, millions of workers in the United States made a living primarily from tips in restaurants, bars, cafes, beauty salons, massage parlors, and many other service-oriented businesses. Now, some of those who lost their jobs during isolation found that they were not eligible for unemployment benefits, because although they worked full time, they did not receive the necessary funds, writes CBS News.

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Sarah May spent 14 working years in the food service industry. Recently, the bar where she worked in White Lake (Michigan) has closed. Sarah immediately applied for unemployment benefits, but her application was rejected.

When May called the representative of the unemployment office, he replied that she had earned too little to qualify for benefits. Under Michigan law, a person must earn at least $ 3 per quarter to qualify for unemployment benefits. May lacked just $ 744.

A worker who receives a minimum hourly wage of $ 9,65 in Michigan would be able to achieve the required minimum if he worked a little more than 30 hours a week. But gratuity workers in Michigan can only pay $ 3,67 per hour, which means they will have to work twice as many hours to earn their unemployment benefits.

“We have great clients, and I made good money from tips,” May said. — I lived from shift to shift and knew how much minimum tip I could earn per shift, so I was guided by how much I could spend before the next shift. Now you can’t plan anything.”

Nationwide issue

This is happening not only in Michigan. In most US states, tip workers are legally allowed to pay less than the state’s minimum wage. In 35 states, this wage is less than $ 5 per hour.

Employers must report on the tip amount of their employees to pay income tax, as well as to obtain the right to unemployment insurance. But such complete reports are rarely sent, since tips are often paid in cash and are difficult to track.

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Many restaurants also incorrectly report on the working hours of their employees, and some do not pay any salaries at all, forcing employees to rely only on tips. An investigation by the US Department of Labor at the beginning of the last decade showed that 9 out of 10 restaurants violated wage laws.

In the end, May was approved for unemployment benefits - several members of Congress intervened in this matter after her calls. But her case is rather an exception.

“Most people just don't want to get involved in all this. They will not request a review of their application, said Andrew Stettner, a senior fellow at the Century Foundation who studies unemployment.

"This is absurd"

Patrick Smith filed for unemployment benefits in early April, shortly after the Pittsburgh, Pennsylvania, café where he worked 50 to 55 hours a week closed. Just last week, he received a letter from the Pennsylvania Department of Unemployment with a similar decision: he wasn't making enough.

“I made approximately $4 in my most profitable quarter of the year. “I was told that I needed to earn $750,” Smith recalls. “It sounds absurd: to qualify for unemployment benefits, you need to earn a lot of money.”

Smith, 20, did not receive federal assistance in connection with the coronavirus, he said that he was also denied food stamps because his parents included their son in their tax return last year as a dependent. Now he lives separately and exists at the expense of the money accumulated before the closure of the restaurant.

Smith's manager suggested contacting the Pennsylvania Unemployment Office on his behalf, but the man is not sure if it is worth it.

“Restaurants will open either June first or June 15th,” Smith said. “If I appeal, I will still receive an answer after I return to work.”

Then he added: “If I were allowed to return to work today, I would have done it.”

High limits for unemployment

The state unemployment benefit system never envisaged helping all unemployed. It is rather an insurance system for groups of employees whose companies contribute to it. States limit the ability to receive benefits by introducing length of service and earnings requirements.

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

“The system is designed to help workers who have been part of the workforce for a long time, have good tenure, and have lost their jobs through no fault of their own,” Stettner explained.

“If tips were included in tax reporting, most workers who are paid properly would typically earn enough to receive benefits. But without reporting tips on paperwork, especially in states where such employees do not earn the minimum wage, they may fall short of the limit,” he said.

According to the Department of Labor, in April about 5,3 million jobs in the food industry alone were cut. A recent study by an advocacy group found that more than 40% of people applying for unemployment benefits were refused.

“This is a disaster of epic proportions,” said Sarah Jayaraman, co-founder of One Fair Wage and director of the Center for Research at the University of California, Berkeley.

On the subject: Crisis and Immigrants: Does Unemployment Benefit Affect Green Card and US Citizenship

The Coronavirus Aid Act provided for an additional $ 600 per week for workers eligible for unemployment benefits. But they determine who has the right to this assistance, state authorities.

Read also on ForumDaily:

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Can I apply for unemployment benefits if you refuse to return to the office during a pandemic?

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