Coronavirus Unemployment Benefits Exceed Past Earnings for Some Workers - Should Benefits Be Capped at Prior Income?

What’s the story?

• Some people who are out-of-work because of stay-at-home orders related to the coronavirus (COVID-19) are receiving unemployment benefits that exceed what they earned while working.
• That has created an incentive for some workers to remain unemployed instead of returning to work, which can complicate efforts to gradually reopen the economy. 
• Ordinarily, turning down a job offer makes a person ineligible for unemployment benefits at least temporarily, but employers are reluctant to report workers when they may need them to return later in the year. Sean Kennedy, the National Restaurant Association’s executive vice president of public affairs, explained the situation to The Wall Street Journal:

“The unemployment benefits are so generous that in many places workers are telling their bosses they’d rather be unemployed than return to their jobs. It’s not that these workers are lazy, they’re just making the best economic decision for their families.”

How did this happen?

• The “phase 3” coronavirus relief bill, known as the CARES Act, temporarily established a federal program known as the Federal Pandemic Unemployment Compensation (FPUC) program to enhance weekly unemployment benefits by $600 for up to four months for workers through the end of 2020.
• The FPUC’s $600 weekly benefit is in addition to standard unemployment benefits doled out by states in partnership with the federal Labor Dept., which averaged $378 per week in 2019. The combined $978 weekly benefit exceeds the weekly pre-pandemic earnings of many workers, as Labor Dept. figures show half of full-time workers earned $957 or less in the first quarter of 2020.
• Before the Senate voted 96-0 to pass the CARES Act, it considered an amendment offered by Sens. Ben Sasse (R-NE), Lindsey Graham (R-SC), Tim Scott (R-SC), Rick Scott (R-FL), and Ted Cruz (R-TX) to cap unemployment benefits at the worker’s average weekly wages while employed to avoid creating a disincentive for workers to get off unemployment.
• The amendment failed on a 48-48 vote, which would’ve required 60 votes in favor to be successful. The vote was mostly along party-lines, as Sen. Joe Manchin (D-WV) was the lone Democrat to join most Republicans by voting in favor, and GOP Sens. Susan Collins (R-ME) and Cory Gardner (R-CO) voted against the amendment. 

— Eric Revell

(Photo Credit: iStock.com / courtneyk)