COVID-19

What kind of unemployment benefits are right for the unprecedented time of COVID-19?

Meghan McCarty Carino Mar 27, 2020
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A closed restaurant after a "shelter in place" order was given to residents to slow the spread of COVID-19 on March 20 in Oak Park, Illinois. Jonathan Daniel/Getty Images
COVID-19

What kind of unemployment benefits are right for the unprecedented time of COVID-19?

Meghan McCarty Carino Mar 27, 2020
A closed restaurant after a "shelter in place" order was given to residents to slow the spread of COVID-19 on March 20 in Oak Park, Illinois. Jonathan Daniel/Getty Images
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The House is set to vote today on the $2 trillion stimulus bill to address the economic fallout of the COVID-19 pandemic. It includes expanded unemployment insurance that could surpass some low-wage workers’ take-home pay. The measure passed unanimously in the Senate, despite four Republicans’ initial objections to the unemployment benefit provision, which they said could incentivize unemployment.

Usually, jobless benefits replace just a portion of a worker’s lost wages, but the debate over how that changes people’s behavior flares up pretty much every time government benefits are extended or made more generous, according to Northwestern University economist Matthew Notowidigdo.

“The concern is that it’s going to lead people to stay unemployed longer,” he said.

It’s a basic principle of economics: The more you subsidize a behavior, the more people do it. And Notowidigdo said there’s pretty solid evidence from countries all over the world that does happen. The longer benefits are available, the longer, on average, people will take to find a job.

“That’s a consistent finding that’s gone back decades,” he said.

That could have some bad effects, according to Angela Rachidi, a scholar at the conservative American Enterprise Institute.

“Their skills deteriorate, they become less able to join the labor market when it is time to join the labor market,” Rachidi said.

But she acknowledges this is an unusual situation. And Luke Shaefer, a professor of social work and public policy at the University of Michigan, said for every person who might use these benefits when they don’t need them, there are others who truly do need them.

“The trade-off is we stabilize workers, we stabilize families, we reduce housing insecurity, we reduce other kinds of material hardship and improve health,” he said.

That has big benefits for the economy and society as a whole, Shaefer said. As for the current situation, Notowidigdo said giving people an incentive not to work might be a good thing.

“That could benefit us all in terms of reducing the spread of this virus,” he said, adding that because so many businesses are shut down due to COVID-19, there may not be a lot of jobs available right now anyway.

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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