Some 30 million Americans are seeing drastically reduced unemployment benefits this week now that the $600 weekly enhancement has expired with little to show from lawmakers with regard to the next round of pandemic relief. A key point of contention stalling a compromise is how to address the policy, passed in the March CARES Act, that gave every jobless individual an extra $600 of federal benefits on top of their state unemployment aid, which came to an end as of July 31.
While a House proposal passed in May would continue the $600 weekly boost until January 2021, Senate Republicans want to cut the aid to $200 per week until October, then switch to a 70% wage replacement model.
Critics of the previous $600 boost want to cut future aid, even though the logistics of doing so could take months to implement, because they say the size of the benefit deters people from going back to work. Roughly two in three workers earned more on enhanced unemployment than they did working their previous jobs, especially among lower earners and people who live in states with low benefit maximums.
A growing body of research has shown no such correlation between boosted unemployment pay and people not returning to work. A Yale report published in July, for example, found that the extra $600 is not the primary reason people are, or are not, working. Rather, the most important factor in whether people returned to work was the availability of jobs.
"We think the reason for the lack of difference is that scarce job opportunities rather than labor supply has been the main factor in determining employment during the pandemic," the report co-authors told CNBC Make It. "While some people may have chosen not to look for work because of the generosity of [unemployment] benefits, the dominating factor in employment levels has been low labor demand."
Relocating for work in the middle of a pandemic
Some people, like Diana Martinez, have gone to great lengths in order to secure new work during the pandemic.
The day after she was laid off from her retail job in March, the San Diego resident applied for a seasonal role with a fishery company in Alaska. Martinez, 30, landed the role a week later but was not scheduled to start working until June, meaning she needed unemployment aid for the two months before her next paycheck.
"The unemployment took a lot," Martinez tells CNBC Make It. She applied for benefits in late March but spent weeks on endless calls with the California unemployment office who said her application was delayed because of technical challenges. "I was desperate by the end of May because I was going to need money to pay debts and to survive [in Alaska] until my first paycheck," she says. She finally received her unemployment benefits on June 1, more than two months after she applied.
Pointing to the $600 weekly benefit as a disincentive to work often assumes that eligible workers are receiving jobless benefits in a timely manner, which many are not. According to data compiled by Andrew Stettner, a senior fellow at The Century Foundation, just 57% of claims — 18.8 million out of 33 million — had been paid nationwide by the end of May.
"This is a temporary job," Martinez adds of her Alaska situation. "I'll be back to San Diego in September, but this was my first option to get an income. I am having fun, although the season isn't good here [and there are] not enough hours, but still something is better than nothing. I just hope I get accepted back to my old job when I come back."
Reemployed workers earn less on the job, worry about security
As the pandemic wears on, hope that furloughed workers will return to their jobs is waning. Nearly half of employees furloughed in the spring now believe their jobs will be permanently gone.
It's a concern that still worries Andres Balzan, 30, who was furloughed in April from his merchandise support job with Macy's but returned to the role in early July.
"It's really a benefit to go back to work," Balzan says. "I'm not making as much as I was not working, but that wasn't the point of unemployment [benefits] — the point was to stay at home during the pandemic."
Despite his Miami store reopening, he is concerned about what will happen as the city navigates health and economic recovery during the pandemic. Florida is among the handful of states that have seen a surge in coronavirus cases in recent weeks.
"I am worried if we go into lockdown again that the store won't open back up," Balzan says. "It could also close again, reopen and I don't get called back. Those are two things on my mind."
Balzan is among many workers who returned to work despite receiving more in unemployment benefits than they do on the job. An analysis from Ernie Tedeschi, an economist at Evercore ISI and former Treasury Department official, found that roughly 70% of people who returned to work in June were previously making more on unemployment benefits. This could be due, in part, to the rule that workers cannot turn down suitable work, including a callback to a previous job, or quit in order to continue receiving benefits.
Still, many people receiving unemployment benefits say dogged job searching often turns up very little. Data shows that job loss is far outpacing job creation: There were nearly 4 unemployed people for every job opening in the U.S. in May, according to the most recent available data from the Bureau of Labor Statistics. And according to data from the workforce management software provider Kronos, for every 10 people hired in the labor market as of late July, 27 people were terminated.
Weighing virus risk against income
A narrowing job market worried Yayra Hosi, 23, who was laid off from her restaurant job in Louisville, Kentucky, in March. While the sociology student had secured a post-college job offer with Progressive Insurance on March 16, her start date wasn't until June 1. She worried, with the state of the economy, that her offer would be rescinded.
Fortunately, she started her job as a claims adjuster for the company right on schedule, though she learned she was the last new person to join her office before they implemented a hiring freeze due to the pandemic. While she had no other income, Hosi says unemployment aid helped her stay current on bills and even kept her on track with her financial goals, including buying her first home.
"Honestly, I feel like I'm in a weirdly bittersweet position," Hosi says. "Sometimes I think, 'Is it selfish that I'm able to do all this with the unemployment money?' And I remember, no, that I'm helping stimulate the economy."
Economists have pointed to boosted unemployment checks as one of the most meaningful forms of stimulus to prop up the U.S. economy. Research from JPMorgan Chase found that while employed workers spent less money in the initial months of the pandemic, the spending of unemployment benefit recipients increased 10%, likely due to the $600 weekly supplement. Other reports show such relief aid has kept 10 million Americans out of poverty during the pandemic and in some cases lifted households above the poverty threshold altogether. Still, the shares of people going hungry and skipping housing payments during the pandemic have gone up, even with increased levels of federal aid.
Despite her own financial stability, Hosi worries about the enhanced unemployment ending for millions nationwide, including her former colleagues in the service industry. "A lot of restaurants and other parts of the economy that were shut down because of Covid are picking back up again, but not necessarily so safely," Hosi says. "My friends, as their unemployment benefits run out, they're thinking what they'll really do to figure things out."
Last week, Kentucky Governor Andy Beshear rolled back restaurant reopenings in response to rising coronavirus cases, which Louisville director of public health Dr. Sarah Moyer said were increasing at "alarming rate" of doubling every week.
Discussions about how to handle the ongoing unemployment crisis stalled after the House passed its HEROES Act in May, and was reignited last week when the Senate released its own HEALS proposal. Negotiations over the next round of pandemic relief, likely to be the last before the November 2020 presidential election, are ongoing.
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