In less than two weeks, enhanced unemployment insurance (UI) benefiting 30 million Americans will expire. Though Congressional Republicans have largely come out against extending the extra $600 a week in federal aid past the end of July, the Trump Administration signaled this week that it is open to continuing enhanced benefits in some capacity.
That's good news for the tens of millions of Americans currently out of work — and good news for an economy that is trying to recover from recent shocks from the coronavirus pandemic, economists say.
The enhanced UI benefits have been deemed the "best" part of the economic response by Josh Bivens and Heidi Shierholz, economists at the left-leaning Economic Policy Institute. Not only did it help keep people home in the middle of a global health crisis, but it also kept money moving through the economy. Consumer spending is critical for any sort of recovery. "Cutting off a policy that helps households maintain spending is a terrible idea, both for these households' welfare and for macroeconomic stabilization," writes Bivens.
Opponents of extending the extra UI benefits say that it disincentivizes people from returning to work, hampering recovery. Including the extra $600 per week from the federal government, an estimated two-thirds of workers who lost their jobs due to coronavirus are eligible for benefits in excess of their normal wages, according to a recent paper from the National Bureau of Economic Research. Treasury Secretary Steve Mnuchin says the administration wants to ensure no one is getting more on unemployment than they usually would at work.
But that argument assumes the world is operating as usual right now (and even then, recent research indicates that people receiving unemployment benefits are more likely to look for jobs than those who have exhausted their benefits). There is nothing normal about the U.S. economy amidst the pandemic and the ensuing recession, according to the National Bureau of Economic Research. While the unemployment rate came down slightly in June, it remains over 11%, which is one of the highest points its been since the Great Depression. And states that attempted to reopen their economies are now closing them again as virus cases spike.
Case in point: There were 3.9 people unemployed for every job available in the U.S. in May, according to the most recent available data from the Bureau of Labor Statistics. All 50 states saw a decrease in job postings over the past two weeks, with total postings dropping 5.5%, according to a new report from Glassdoor.
Not to mention, other reports indicate that many people who do qualify for unemployment insurance have yet to receive any benefits at all.
It's not that people don't want to return to work because they are receiving more money to sit back and do nothing. Rather, jobs just aren't available yet, Beth Akers, a former staff economist on Council of Economic Advisors under former President George W. Bush, told CNBC. When — and if — jobs are available, many people are worried about returning to work in the middle of a pandemic that is getting worse again throughout the country.
Increased unemployment assistance — along with food assistance spending — will provide the most meaningful boost to the U.S. gross domestic product over the next year, Moody's Analytics chief economist Mark Zandi and Harvard economics professor Raj Chetty said recently.
"It's not that lots of folks who have jobs to go back to are choosing not to go," Chetty said on a briefing hosted by the Center on Budget and Policy Priorities last week. "There's no work to do."
In May, the House passed a bill that would extend the enhanced $600 benefit through December 2020, though it is not expected to pass the Senate. Republican lawmakers have proposed other ideas, including one time back-to-work bonuses and tying aid amounts to the unemployment rate. But the signal from the White House this week could mean enhanced unemployment makes it in the next stimulus package in some capacity.
As Congress debates what to do next, nearly 32% of U.S. households missed their July housing payments and the Urban Institute estimates tens of millions of Americans will face an "income cliff" at the end of this month, leaving them unable to cover food, housing and other living expenses.