COVID-19

How Americans are likely to spend the second round of relief checks

Mitchell Hartman Dec 29, 2020
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Senate Majority Leader Mitch McConnell blocked Democrats' move for $2,000 relief checks. Above, McConnell arrives on Capitol Hill on Dec. 20. Tasos Katopodis/Getty Images
COVID-19

How Americans are likely to spend the second round of relief checks

Mitchell Hartman Dec 29, 2020
Heard on:
Senate Majority Leader Mitch McConnell blocked Democrats' move for $2,000 relief checks. Above, McConnell arrives on Capitol Hill on Dec. 20. Tasos Katopodis/Getty Images
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Long-awaited fiscal relief is in sight for many Americans, but the suspense continues.

Senate Majority Leader Mitch McConnell blocked an effort by Democrats Tuesday to raise the amount of the next round of relief checks to $2,000. That leaves the amount, for now, at $600 per person and $1,200 per couple. 

Something is better than nothing for folks who’ve been out of work for a while. So how we can expect this round of relief payments to move through the economy compared to the last time? 

In the spring, as the pandemic spread and the economy was shut down to stop it, relief checks went out: $1,200 for an individual and $2,400 for a couple. Constantine Yannelis, an economist at University of Chicago, said within the first three months, most of the money stayed in the bank.  

“People spent about a third of their checks,” he said, for two reasons.  

First, those who still had their jobs and income didn’t need the money to pay their bills. And with pandemic shutdowns, it was hard to shop and travel the money away. 

Meanwhile, Americans who had lost jobs and income tried to stash away whatever relief money they could.

“People had expectations that the crisis would be very long, and their income might be disrupted for a long period of time,” Yannelis said.

This time around, Yannelis thinks that even with vaccination underway, there’s still so much economic uncertainty that most people will try to save some of the money again.

But that may be harder with this second round of checks. Nine months into the pandemic, millions of Americans are still out of work and unemployment benefits are dwindling.

“Lower- and middle-income Americans who really have very little savings have gradually had to eat into their savings, because they don’t have the income to cover their expenses each month,” said John Leer, an economist at Morning Consult.                                       

They’re likely to spend their checks right away on necessities: food, rent, utility bills and car payments. 

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

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Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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