Continue the $600 Unemployment Boost, Don’t Phase It Out
By Wesley Bignell, Colin McAuliffe, and Marshall Steinbaum
Throughout the Trump administration’s disastrous response to the pandemic, expanded unemployment insurance benefits have provided critical financial support to workers and their families while also advancing public health goals. The CARES Act broadened UI eligibility to include self-employed workers and independent contractors who are typically excluded from the unemployment system. Moreover, it provides all unemployed workers who qualify for UI benefits with an extra $600 boost every week, in addition to the standard insurance payout.
For middle-wage workers, enhanced UI benefits provide approximately full wage replacement. For lower wage workers, who often have limited savings and struggle financially, the $600 boost delivers full wage replacement plus much-needed additional financial assistance on top.
That $600 boost, however, is set to expire on July 25th, less than four weeks away. If that happens, the weekly income of tens of millions of unemployed workers will drop off a cliff from 100 percent or more of prior wages to 50 percent or less. Expanded unemployment is helping workers and their families to stay safe and economically secure. Without it workers will rapidly find themselves impoverished and left with no choice but to seek work in an ongoing pandemic, which will not only endanger themselves and their families, but also increase transmission rates overall, further prolonging both the health and economic crises.
In contrast to a recent proposal by Senator Ron Wyden and Senator Charles Schumer, we argue that the full $600 weekly benefit should be continued throughout the public health and economic crises, and beyond, not phased out as the unemployment rate declines. We see at least five key reasons for supporting the indefinite extension of expanded UI benefits.
1. There is not a shortage of willing workers, but instead a shortage of safe and appropriately compensated jobs. Too many elected officials and economists are mired in an ideological worldview that insists workers must be at all times dependent on employers for their livelihood. In the middle of a pandemic, Republicans are arguing to cut expanded UI benefits completely or convert them into a return-to-work bonus. And even a few Democratic policymakers have proposed severely slashing expanded unemployment benefit levels. Their shared fear is that generous UI benefits will “disincentivize work,” “distort labor markets,” and hamper economic recovery.
Labor policy should not force workers into bad jobs, but instead foster conditions that drive employers to make better offers. To be frank, withdrawing benefits in this economic climate is redolent of the logic that undermined the Reconstruction of the South after the Civil War: that its economic development demanded the re-subordination of freed slaves. A more egalitarian system of labor and economic conditions simply could not be contemplated by those in power, even if it was demanded by the workers themselves.
In any case, employers still hold significant power over their former employees even with expanded UI benefits. Workers cannot refuse an offer of “suitable” employment or else they lose their benefits. If an employer wants their previous workers back, all they have to do is call. Additionally, a recent study finds no evidence that higher UI replacement rates are impeding re-hiring so far. That is not surprising given that there are over four unemployed workers for every job opening.
At some point, if PUC is extended, employers may have to raise wages to attract workers to positions that come with higher health risks. That is the real fear behind economists’ and conservative officials’ demands to curtail expanded UI. An analysis of job postings on Indeed.com found that job seekers had lower search interest in “nonmedical essential jobs” in May than they did in February. This may be due in part to the fact that the average advertised wage for these jobs increased by only $0.25 despite the changed environment. Another recent study of payroll data found that a sizable share of higher wage workers have received wage cuts, though lower wage workers have mostly been spared. But as more workers begin actively competing for jobs, they will need a strong bargaining position. And in that sense, the $600 boost arguably improves how the labor market functions.
2. The economy cannot recover until we control the virus, and empowering workers helps to achieve that goal. The expanded UI program was originally intended to support businesses and workers during public health measures that closed workplaces to suppress and control spread of the virus. Now, almost 14 weeks later, the Trump administration appears to have given up as new cases reach record highs. While some states that endured severe early outbreaks are now doing much better, the overall public health outlook remains bleak as ever.
Many state leaders lifted restrictions on workplace activity far too soon and now refuse to take the steps necessary to limit the spread of infection while permitting the economy to function. If the virus continues to be as prevalent in the states where it’s now spiking, with no meaningful suppression measures put in place, then it will return to the states that are as of now past their first peak.
In other countries employers are working with labor to develop strong safety measures. But in the US, employers maintain wide latitude to develop their own safety standards, and in the current environment of underfunded public workplace safety regulation and “mandatory arbitration” for private claims, workers have essentially no recourse if their health is placed at unreasonable risk. The safety of workplaces, workers, households, and communities is left to voluntary measures.
Continuing the $600 boost gives employers who actually value the health of their workers and community the ability to shutdown and restart operations as needed without imposing severe financial hardship on their staff. Alternatively, in the case of employers whose practices put their employees and customers at unacceptable risk, workers have a possible fallback if they lose their job as a result of bringing attention to a safety concern.
3. Low-wage workers have suffered disproportionate job losses, so the $600 UI boost puts money into the hands of households most likely to spend it. Perhaps the most compelling argument for those who are not especially concerned about the fate of vulnerable workers is that expanded UI provides a large, targeted stimulus to the economy. Indeed, early evidence indicates that even with historic job losses, lower income households have seen an increase in both household income and consumption. Meanwhile, consumer spending in high income ZIP codes is sharply down. Josh Bivens estimates that “extending the $600 UI benefits through the middle of 2021 would provide an average quarterly boost to gross domestic product (GDP) of 3.7% and employment of 5.1 million workers.”
4. Lower-wage workers need and deserve far more power in negotiating wages, benefits and working conditions, and enhanced UI provides them with a strong outside option (which is why bosses hate it). The coronavirus has helped make clear exactly who our political and economic systems prioritize and value, and whose health, well-being and even life are deemed expendable. Low wage workers have been hit particularly hard with both job losses and being compelled to work in high-risk conditions with inadequate protective equipment.
The devaluation of low wage work and low wage workers did not start at the onset of the pandemic. US low wage labor markets have long been discriminatory, exploitative, and abusive. Though COVID data is not reported by occupation or income, we know that cases, hospitalizations and deaths have been sharply higher among Black and Latino people who are overrepresented in the low-wage and essential workforces, because a highly stratified labor market allocates to them the most dangerous workplaces and living environments. The Center for Disease Control attributes these health disparities to “inequities in living, working, health, and social conditions that have persisted across generations.”
Two recent studies suggest that the financial support provided through the CARES Act, including unemployment benefits, may have actually reduced the poverty rate – in the middle of a pandemic. The lesson here is that the $600 boost should be more than a temporary crisis-fighting measure. Rather it offers a way to rethink our policy posture altogether. Instead of forcing people to work to live, and to live in conditions that constantly threaten their health, we should broadly reorient our thinking to supporting workers and their families outside the context of traditional employment, the better to make them independent of any one job or abusive boss.
5. Lastly, the $600 boost is broadly popular with voters, without phasing it out, and even when they are directly reminded that some workers would receive more in UI benefits than from their previous job. Many commentators are quick to note that the $600 boost was an accident based on low administrative capacity at state UI agencies. This is true. But that has proven less of a negative reflection on the policy, and more as an indictment of the limits of our political imagination and sense of what is possible. The flat $600 benefit may not be an “optimal” policy design. However, at the same time, it has provided more assistance to households and local economies than anything that Congress would have intentionally crafted.
Even if the policy is not universally beloved by the wonks, it is nonetheless highly popular with voters. According to a recent Data for Progress poll, 60 percent of voters favor providing the $600 boost for at least another four months. Democratic voters overwhelmingly favor the policy, and even 52 percent of Republicans support it. These results are consistent with other recent polls.
Received wisdom about public opinion as it relates to welfare policy and social insurance holds that the public does not support any program that pays people for not working or otherwise favors the idle at the expense of the hard-working. So therefore, any expansion of the welfare state or social insurance systems must "reward work."
However, a separate Data for Progress survey item (results below) asks about UI policy preferences and specifically highlights that “Some workers make more than they would make at their jobs.” The experience of expanded UI benefits is showing that the conventional wisdom is false: the public supports the $600 boost regardless of payments in excess of earnings, and perhaps even because of them. Unsurprisingly, on this survey item, Democratic voters have the most favorable view of expended UI benefits, but it is also viewed favorably at every age, race, income and education level.
We are less than four weeks away from the July 25th expiration of expanded unemployment benefits. This program provides a powerful and effective way to support workers and their families for the duration of the pandemic. It also offers an opportunity to bring something new into our political economy with the potential to increase worker power over the long term. The case is clear, the $600 boost should be continued.
Authorship & Methodology
Marshall Steinbaum (@Econ_Marshall) is Assistant Professor of Economics at the University of Utah. He studies how the labor market works, which is to say, why it doesn’t.
Wes Bignell (@wsbgnl) is a social science researcher who lives in Seattle.
Colin McAuliffe (@colinjmcauliffe) is a co-founder of Data for Progress.
From June 21 through June 22, 2020, Data for Progress conducted a survey of 1,353 likely voters nationally using web-panel respondents. The sample was weighted to be representative of likely voters by age, gender, education, race, and voting history. The survey was conducted in English. The margin of error is +/- 2.7 percentage points.