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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

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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