Personal Finance

Make over $55,000? Unemployment benefits may replace less than 70% of your wages under HEALS Act

Key Points
  • The HEALS Act, which Senate Republicans unveiled Monday, would end the $600 weekly boost to unemployment benefits.
  • Unemployment aid would replace 70% of people's lost wages, per the GOP coronavirus relief plan. 
  • But workers who made more than around $55,000 to $57,000 pre-tax in Mississippi, Arizona, Louisiana, Alabama, Florida and Tennessee would see a lower share of lost earnings replaced.
Steven Mnuchin, U.S. Treasury secretary, left, and Mark Meadows, White House chief of staff, speak to members of the media after the Senate Republican policy luncheon on Capitol Hill on Tuesday, July 28, 2020.
Stefani Reynolds/Bloomberg via Getty Images

Senate Republicans want unemployment benefits to replace 70% of lost wages.

But that wouldn't apply across the board.

For many high earners and middle-class workers, particularly those living in the South and Southwest, unemployment benefits would replace a smaller share of prior pay.

That's due to a cap Republicans placed on federal aid.

More from Personal Finance:
Why unemployment is a broken system
In HEALS Act, student loan borrowers don't get much
How second stimulus checks may differ from the first

Exactly who would get less than 70% of lost wages largely depends on the generosity of their state's unemployment program.

And it varies broadly.

In some states, an unemployed worker who had made more than $55,000 a year would have a wage replacement of less than 70%, according to a CNBC analysis of the Republican proposal. In other states, the bar is closer to $100,000.

"I was surprised at how low that income threshold was in some states," said Ernie Tedeschi, an economist at Evercore ISI.

"[At] $55,000, you are not rich," said Tedeschi, a former Treasury Department official, adding that "that's pretty solidly middle class" in states with that threshold.


Unemployed workers have been getting an extra $600 a week from the federal government since late March to supplement state jobless aid.

That enhancement, created by the CARES Act, ends July 31.

A coronavirus relief plan unveiled Monday by Senate Republicans — the so-called HEALS Act — would cut that subsidy to $200 a week until October.

Then, states would shift to a system whereby combined state and federal benefits would replace 70% of a worker's prior pay. (For comparison, state aid replaced an average 38% of lost wages in the first quarter of 2020, according to the Labor Department.)

But Republicans would cap the federal supplement at $500 a week. Since states also cap their weekly pay, there would be an upper limit on the amount of aid a worker could get.

The ceiling kicks in fastest for unemployed workers in Mississippi, Arizona, Louisiana, Alabama, Florida and Tennessee.

There, anyone with a salary exceeding $54,600 (Mississippi) to $57,571 (Florida and Tennessee) would make less than 70% of prior pay from unemployment benefits, according to a CNBC analysis.

The economy will go backwards when we cut out the $600 a week: Fertitta
The economy will go backwards when we cut out the $600 a week: Fertitta

This is due largely to the less-generous nature of these states' unemployment systems. Mississippi, Arizona, Louisiana, Alabama, Florida and Tennessee cap their aid at between $200 and $300 a week.

By comparison, other states like New Jersey, Connecticut, Rhode Island, Minnesota and Washington cap their weekly unemployment benefits at between $700 and $800.

It therefore takes a much larger salary in these states to hit the income threshold. Only when one's salary exceeds $90,000 to $96,000 does their wage-replacement rate start to fall below 70%.

In Massachusetts, which has the highest weekly benefit cap (above $1,200), the salary threshold is nearly $129,000.

Lower earners

Of course, this doesn't necessarily mean lower earners do well under the Republican plan.

The current $600-a-week policy has disproportionately helped lower earners over higher ones.

For one, lower earners have been more likely than higher earners to lose a job during the pandemic.

The $600 weekly supplement also offered a substantial income boost for these workers.

Consider the average bartender, who makes about $13.50 an hour, according to the Bureau of Labor Statistics.

This person would make just $378 a week from unemployment under Senate Republicans' 70% plan. However, if this worker were collecting the average state unemployment benefit ($321 a week in May), they would take home about $921 a week via current policy — more than twice the amount of the Republican plan.

Pipe dream?

Of course, this all assumes the 70% plan becomes law — which isn't a given, since Democrats don't support the policy.

It also assumes states can implement such a formula, which experts say is more complicated than a flat weekly payment (since it's individualized for each worker) and would take months to implement.

"It's a heavy lift for the states to do anything like this," said Andrew Stettner, a senior fellow at the Century Foundation.