THREAD. At a time when the economy is growing rapidly again, the last thing Congress should do is make unemployment more financially rewarding than working.

My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-02-11/biden-s-unemployment-checks-are-too-high @bopinion

2/ The Biden administration wants to top up unemployment benefits by $400 per week through September. Under this plan, the average unemployed worker would receive over $3,000 per month in benefits.

3/ A recent paper finds that if the president’s plan were enacted, 62% of workers would receive more from unemployment compensation than from working. For over one-quarter of workers, weekly benefits would be 40% larger than their weekly wages.

4/ In an expanding economy that is putting the virus behind it, paying people more in unemployment than they could receive from working is an act of substantial economic self-harm.

5/ It would keep workers on the sidelines, stop the unemployment rate from falling as rapidly as it otherwise would, and slow the overall recovery.

6/ When the pandemic struck last March, Congress added $600 to standard benefits, bringing the total amount an unemployed worker could receive in a week to an average of around $987.

7/ The goal of the $600 supplement was to replace (roughly) all the income people lost from being unemployed, rather than just the fraction of their income that standard benefits would replace.

8/ Many economists, myself included, would normally have been worried that fully replacing lost income would keep many people on the unemployment rolls and out of paid work. But the situation last spring was anything but normal.

9/ During the severe lockdowns of that time, one goal of the policy was to stop the unemployed from looking for work, because if they were handing out resumes and going on job interviews they risked spreading the virus.

10/ During the spring lockdowns, the downside of unemployment compensation — that it encourages workers to remain jobless — was actually a strength. Moreover, with unemployment skyrocketing and labor demand collapsing, relatively few jobs were available.

11/ So it’s not surprising that economic research suggests that the $600 supplement did not reduce hiring or employment throughout the summer.

12/ But just because the unusually generous unemployment benefit didn’t keep workers out of jobs in the early months of the pandemic does not mean that it wouldn’t in the summer and fall of 2021.

13/ A large body of research finds that more generous compensation led to longer periods of joblessness. This evidence, and not what happened in the spring and summer of 2020, is a better guide to the current year.

14/ The President's proposal for a $400 weekly unemployment benefit supplement would keep workers on the sidelines, stop the unemployment rate from falling as rapidly as it otherwise would, and slow the overall recovery.

Fin/ In an expanding economy that is putting the virus behind it, paying people more in unemployment than they could receive from working is an act of substantial economic self-harm.

My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-02-11/biden-s-unemployment-checks-are-too-high @bopinion