The FEMA money is expected to be exhausted in two weeks, although some states have been told that the week ending Sept. 5 would be the last the extra $300 would be included. That means jobless people will be forced to scrape by on state benefits that average $382 a week. Benefits typically amount to about 40% of workers pre-pandemic wages. Under the current situation, even that will only last a maximum of 39 weeks, depending on the state. This marks the 26th week that the first people started receiving benefits because of coronavirus-related layoffs.
Although House Democrats (and one Republican) voted nearly four months ago to extend the extra $600 for the unemployed in the $3 trillion HEROES Act, Republicans wanted nothing to do with it. Senate Majority Leader Mitch McConnell came up with the $1.1 trillion HEALS Act, but he couldn’t even convince enough members of his own caucus to support it. So he followed that with a “skinny” $500 billion relief bill, which included a $300 extra weekly benefit through the end of 2020. This week, he got his flock in line, but Democrats followed Minority Leader Chuck Schumer’s view that the bill, which the Republicans called “skinny” was actually “emaciated,” and the bill got just 52 votes, far short of the 60 needed to avoid a Democratic filibuster.
There is now next zero chance a relief bill will pass before the election is over the first week of November, if then.
It’s estimated that if that extra $600 were maintained through mid-2021, it would raise the average quarterly gross domestic product by 3.7% and support consumer spending that would keep 5.1 million workers employed who otherwise wouldn’t be.
Now, with neither an extra $600 nor $300 a week being added to unemployment paychecks, individuals and families will be forced to make severe cuts in their personal spending. And what that means is workers who were providing the goods and services that this government-subsidized spending was supporting are going to lose their jobs, leading to more layoffs. And that means more long-term damage to the economy.
Republicans have argued practically since the insurance program was included in the Social Security Act in 1935 that unemployment benefits, modest though they are, contribute to laziness on the part of workers. This was a key argument during the Great Recession when Democrats repeatedly pushed for the duration of benefits to go from the standard 26 weeks to what eventually became 99 weeks because it was taking so long for the economy to be dug out of the crater the financial crisis had created.
This summer Republicans made the same argument about the extra $600 calling it a disincentive for people to return to work. As a certain presidential candidate might say, that’s malarkey.
Here’s Heidi Shierholz at the liberal Economic Policy Institute demolishing the Republicans’ assertion:
Rigorous empirical studies show that any theoretical work disincentive effect of the $600 was so minor that it cannot even be detected. For example, a study by Yale economists found no evidence that recipients of more generous benefits were less likely to return to work, which is what we would expect to see if the extra payments really were a disincentive to work. And a case in point: in May/June/July—with the $600 in place—9.2 million people went back to work, and a large share of likely UI recipients who returned to work were making more on UI than their prior wage. The extra benefits did not stop them from going back. A job offer is too important at a time like this to be traded for a temporary increase in benefits, and when commentators ignore that, they are ignoring the realities of the lives of working people. Further, there are 8.5 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do. Dropping the $600 cannot incentivize people to get jobs that are not there. […]
Dropping the $600 is also exacerbating racial inequality. Due to the impact of historic and current systemic racism, Black and brown communities have seen more job loss in this recession, and have less wealth to fall back on. They are taking a much bigger hit with the expiration of the $600.
Something both the Great Recession and the Pandemic Recession have shown is that our system for protecting the unemployed is seriously out of date. At the very least, it should get some restructuring. But a major upgrade is really what’s needed. Perhaps before Democrats delve into that effort come next year, they will pay attention to what other nations do. Like Germany, or gasp, Denmark.