Read on Twitter
Republicans want to extend additional unemployment benefits but cut them substantially: to about $200/week for the typical worker, down from $600/week for all workers right now.
More on the plan and what it would mean here, from me and @jimtankersley: https://www.nytimes.com/2020/07/23/business/economy/unemployment-benefits.html
More on the plan and what it would mean here, from me and @jimtankersley: https://www.nytimes.com/2020/07/23/business/economy/unemployment-benefits.html
This (still very preliminary) plan would be set so that state + federal benefits would total 70% of a workers' pre-pandemic earnings. That's instead of the current $600 lump-sum that's being tacked onto everyone's regular state unemployment checks.
One key point: Because benefits under this plan would be set at a percentage of workers' prior earnings, low-wage workers would get less federal assistance, and would see their checks cut by *more* than higher earners.
It's still not clear whether this plan is technically feasible. Back in March, Democrats proposed federal assistance to bring benefits up to 100% of workers' pre-pandemic earnings, but the Labor Department said that was impossible because of states' antiquated computer systems.
The $600 was essentially a kludge: It was set at a level to bring the wage replacement rate to about 100% *on average.*
In practice, that meant most recipients ended up earning *more* on unemployment then they did while working. https://www.nytimes.com/interactive/2020/04/23/business/economy/unemployment-benefits-stimulus-coronavirus.html
In practice, that meant most recipients ended up earning *more* on unemployment then they did while working. https://www.nytimes.com/interactive/2020/04/23/business/economy/unemployment-benefits-stimulus-coronavirus.html
The $600 might have been an accident of history, but it was very effective as stimulus: It means most of the money went to people with no income and little savings, which means they spent it. See research here from @FionaGreigDC @JoeVavra et al: https://institute.jpmorganchase.com/institute/research/labor-markets/report-consumption-effects-of-unemployment-insurance-during-the-covid-19-pandemic
The extra unemployment benefits have been injecting billions of dollars per week into the economy. Shrinking them now means less money flowing to landlords, retail stores, etc., at a moment when the economic recovery is *already* losing steam.
What about incentives to work? Conservative economists have been uncomfortable from the start about people earning more from not working than from working. And they're more worried about it now, when we're trying to get the economy going again (at least in some places).
They argue that disincentivizing work is bad not only for the economy but also for the workers themselves: Lots of research shows that long periods of unemployment make it harder to return to the labor force. Those "scarring effects" are a very real concern.
It's important to note, though, that there's no evidence that these benefits are discouraging work *right now.* See this analysis from @ernietedeschi for example: https://twitter.com/ernietedeschi/status/1283832188434362368
I've spoken to a lot of unemployed workers in the past few months. Nearly all of them would prefer to get back to work, in part because they know there's no guarantee these benefits will continue, and they worry about being able to find a job when they run out.
I'm sure there are people who would rather stay on unemployment. But right now, there are far more available workers than available jobs. What's holding back the economy is a lack of jobs, not a lack of workers.
http://www.igmchicago.org/surveys/jobs-and-unemployment-insurance/
http://www.igmchicago.org/surveys/jobs-and-unemployment-insurance/
Given the spread of the virus right now, there's also a public health consideration: One of the original goals of the extra benefits was to allow people to stay home to contain the virus. That's still an issue in much of the country. https://www.nytimes.com/2020/07/21/business/economy/coronavirus-unemployment-benefits.html
