Study: Unemployment pays better than work for 68 percent of U.S. workers

By Bethany Blankley | The Center Square

The federal unemployment insurance emergency payments of an additional $600 per week to those laid off because of COVID-19 restrictions discourages work and slows down economic recovery, several reports indicate. Several congressmen have introduced proposals to address the issue.

A report published by the Foundation for Government Ability (FGA) found that by nearly tripling average unemployment benefits through the CARES Act, “Congress has created a situation where unemployment now pays better than work” for roughly 68 percent of U.S. workers.

Wikimedia Commons

This sign may no longer be factual. The average unemployed worker now collects nearly $1,000 per week, the equivalent of more than $50,000 annually.

The CARES Act provides an additional $600 per week in unemployment insurance benefits through the Pandemic Unemployment Assistance (PUA) program. This assistance also includes individuals previously not covered by traditional unemployment insurance, including the self-employed, contractors, gig economy workers and others. It’s also on top of state unemployment benefits.

The average unemployed worker now collects nearly $1,000 per week – the equivalent of more than $50,000 annually, FGA calculates. For most unemployed workers, “sitting at home now pays better than returning to work,” FGA concluded. “This disincentive to work is devastating employers who are trying to reopen and save their businesses from bankruptcy or closure.”

According to a paper published by the National Bureau of Economic Research (NBER), 42 percent of recent layoffs due to the coronavirus response in the U.S. will result in permanent job losses.

The researchers found that only three new hires were made in the U.S. for every 10 people who were laid off as a result of state executive orders shutting down the economy, and “estimate that 42 percent of recent layoffs will result in permanent job loss.”

“Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock,” they add.

“The pandemic UI bonus undercuts the entire purpose of the unemployment system: to cover a portion of lost wages temporarily until the worker can quickly find work,” Joe Horvath, paper co-author and senior fellow at FGA, said in a statement. “The pandemic unemployment benefit came from a place of good intentions, but the incentive to refuse work that it is now proven to create was predictable from day one.”

FGA recommends several steps states can take to move more individuals back to work as economies reopen, including a simple, easy-to-use process for employers to report employees who have refused an offer of suitable work

Another FGA paper includes testimonies from a Vermont medical supply producer, a Tennessee furniture storeowner, a New York retailer, an Arkansas mill, among others, indicating that business owners are having difficulty rehiring their employees.

“Across the country and across industries, stories are pouring in from small business owners who cannot reopen their doors due to a government policy that makes sitting at home more lucrative than going to work,” Victoria Eardley, paper author and senior research fellow at FGA, said in a statement. “Our economy will collapse if we continue to incentivize unemployment over a return to normal.”

A new proposal introduced by Ways and Means Leader Kevin Brady, R-Texas, would transform unemployment benefits into a back-to-work bonus by allowing workers to keep up to two weeks of additional federal unemployment benefits after they accept a job offer.

“As more businesses re-open across the country, employers shouldn’t have to compete with unemployment to bring workers back,” Brady said.

U.S. Reps. Ted Budd, R-North Carolina, and Ken Buck, R-Colorado, also introduced a bill to amend the unemployment section of the CARES Act.

The bill caps the amount an individual can receive from unemployment insurance at 100 percent of their previous wages.

Budd said, “… businesses across the nation are struggling to hire workers because many individuals are receiving more money through unemployment insurance than they earned when they were working. We must do everything in our power to eliminate this perverse incentive. We have to get our fellow citizens back into the workforce as soon as possible.”

Image courtesy of Wikimedia Commons

3 thoughts on “Study: Unemployment pays better than work for 68 percent of U.S. workers

  1. There a few extra points. The federal bump of $600.00 per week ends July 31st so that goes away. The fed bump allowed some people to save for the next uncertainty, as in the people who work in tourism, hospitality, bars restaurants, etc.. Many if not most of these places are still not open. Most people would rather work and have a normal life than this fiasco. No one knows the truth and many have no idea when it ends for them. I would imagine the federal bump saved many mortgages, rent and other expenses of life. What if this continues into winter with heating costs? It’s not all fluff for most people and probably should have been means tested but none of us were responsible for the lock down of the economy. We are Americans, at least most of us so let’s start acting like Americans and open this economy now! If you are infirm, ill or just afraid stay home. The country needs to get back to work!

  2. Every where you turn you see help wanted or we’re hiring signs which go begging. Why work when the dole pays much more. This is the unintended consequence of giving away the store with a well meaning support program. OK, enough is enough. The program is supposed to sunset on July 31. Now there are rumblings of extended the program. Time to move on and address more pressing issues. If this program disappears, the unemployment numbers will drop even faster than the last report for June.

  3. I was laid-off once, married with two kids I received 85% of my weekly
    wages and was made to go look for work no matter what it was !!!.

    In today’s world lose your job you can get a $ 600-week raise and elected
    officials wonder why unemployment is still high.

    Why work, I wouldn’t……………..

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