What kind of unemployment benefits are right for the unprecedented time of COVID-19?
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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
Which businesses are allowed to reopen right now? And which businesses are actually doing so?
As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.
Will you be able to go on vacation this summer?
There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
You can find answers to more questions here.
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