Opinion | As long as coronavirus looms, the $600 unemployment top-off should stay

Alix Gould-Werth

Alix Gould-Werth is director of family economic security policy at the Washington Center for Equitable Growth

Casey Miller’s job was his passion. After hours of study and years of training, he secured a bartender position in Ann Arbor, designing and serving high-end cocktails. The service industry is notorious for its grueling hours and low pay—Casey made about $700 a week, including tips. When the coronavirus pandemic hit, he feared contracting COVID-19 at work. Then, the bar closed, and his worries shifted to his economic future.

When claims flooded in, the internet servers hosting Michigan’s Unemployment Insurance system crashed. But Casey was persistent. He filed his claim at 3 a.m., when web traffic was low. Now, each week, he receives $360 in regular benefits and a $600 pandemic-specific top-off. Though some wring their hands over unemployment checks that they see as oversized, providing people like Casey and so many others in similar circumstances with enough money to meet their basic needs is an effective solution to an unprecedented crisis. For this reason, the $600 payments should continue beyond their current July 31, 2020 expiration date.

The $600 policy solution was enacted in March, when the toll of the coronavirus crisis first became clear. Some policymakers wished that—in this unusual context—each worker could take home the exact amount they received while working. But the same systems that crashed under increased claims could not implement a new, individually tailored formula on short notice. Instead, the simple $600 increase lets average workers cash unemployment checks roughly equal to their old paychecks. The lowest earners bring home more than they made on the job, and the highest earners bring home less

As Casey’s story shows, this is a smart way to target benefits. What did Casey do when he received an unemployment check that was larger than his paycheck? He spent it. While working, he had just been able to pay rent and save $5,000 for retirement annually. To make ends meet, he needed every penny of his unemployment check. When it arrived, he paid his rent in full. With the income bump, he had groceries delivered and stopped spending extra time in the grocery store, comparing prices for the best deal and potentially exposing himself to COVID-19.

Research shows that while high-earning workers save benefit dollars, low-earning workers spend them out of financial necessity. Many low earners—particularly workers of color who face generations of labor market discrimination—lack inherited wealth and well-resourced social ties. Low wages, paired with broader economic deprivation, make both saving and buying unnecessary goods difficult. As a result, low-earning workers spend their benefits to keep prescriptions filled, food on the table, and a roof overhead.

The extra $600 creates a virtuous cycle. Directing cash to those who need it most channels dollars to businesses, which employ more workers, who, in turn, have income to spend. This stabilizes the labor market now, and when working conditions are safe and stimulating the economy becomes an urgent policy goal, this circulation of cash will be crucial to our economic recovery.

The recent release of the May Employment Situation Report shocked many, showing an uptick in employment levels. Immediately, some policymakers seized on the better-than-expected figures to re-up their calls to let the $600 add-on expire. But thousands of new cases of coronavirus are reported daily, many businesses are unable to operate safely, and the number of unemployed workers is far greater than the number of job openings. While Casey's bar has re-opened, Casey is not back at work. July 31 is rapidly approaching, and if the $600 add-on lapses, Casey’s benefits will revert to $360 per week. If he remains unemployed, he will still spend his full check, but he won’t be able to meet his basic needs—and the amount of money he channels back into the economy will be far less.

For months now, some have argued that it is dangerous to provide high benefits to low earners. They say people will turn down jobs that pay less than their unemployment check offers. In reality, people who turn down suitable work lose their benefits, and, as the May numbers show, people are returning to work regardless of the $600 bonus. These arguments also miss the larger point: The current economic crisis is off-the-charts grim. If we reduce the amount of money circulating in the economy, there won’t be jobs for people like Casey to return to.

Instead, using thoughtfully constructed rules to phase down additional benefits as the health crisis subsides and employment increases will keep the $600 payments flowing when the economy needs it most and allow workers time to search for a job that is a good match for their skills, their health, and their families. Lowering the amount or cutting it off too early spells disaster for our families and our economy.

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Comments

jesse atwell
Sat, 06/20/2020 - 9:42am

Continuing the additional $600 corona virus unemployment payment only prolongs economic recovery in Michigan. I own a small company in Midland, MI and find that even though jobs are being offered, people are not motivated to even consider going back to work. They have no incentive to return as long as they can receive more money from the state than they can make working. It's socialism at its worst.....they just sit and wait for gov't to take care of all their needs....No need to get up and go to work....

Kevin Grand
Sat, 06/20/2020 - 11:36am

Ms. Werth, how do you intend to pay for this?

Michigan is over $6-billion in the red.

The federal government WILL NOT bail it out.

Michigan cannot just print more money.

So, where will the money come from?

Joe
Mon, 06/22/2020 - 8:42am

Kevin,
Note that the author is from a Washington DC advocacy organization. I expect that a version of this opinion piece is appearing across the country.
However, the federal government pays this extra $660; it is not funded by state budgets. so Michigan does not have to come up with this money.

Arjay
Tue, 06/23/2020 - 7:01am

And the Federal Government gets its money from who?

Kevin Grand
Tue, 06/23/2020 - 7:35am

That could be very well true, Joe.

It wouldn't be the first time I've seen multiple media outlets glom onto something like this. I would actually be surprised if she didn't send copies of the above piece to other publications.

Now, about the extra Wuhan UIA money; yes, the federal government originally kicked that in. But, will they do it again?

Nothing I've seen so far has indicated that Washington will be opening up the public purse as much as they did earlier this year, if they even do it again at all.

Which leaves the only other source of funding; Lansing.

Aside from acknowledging the problem, my elected officials are staying VERY tight-lipped regarding how they intend to address a $6-billion+ hole in their budget. They WON'T rule out tax hikes. They WON'T talk about budget cuts. This being an election year doesn't help out much either.

The money has got to come from somewhere. Ms. Werth has a Ph.D. in Social Work and Sociology. I'm going to go out on a limb here and presume that part of her education covered finding sources of revenue to pay for what they are proposing.

Which could also be the very reason why she didn't mention anything about it above.

Joe
Mon, 06/22/2020 - 8:38am

I disagree. I think that there is strong evidence that people are turning down suitable work to keep their higher unemployment benefits. Any process that is intended to terminate benefits if suitable work is declined is apparently not working and is likely overwhelmed by this historic wave of unemployment.
The extra benefit needs to be reduced or eliminated until there is an effective way to ensure workers return to work when jobs are offered.

Bones
Mon, 06/22/2020 - 12:58pm

"The extra benefit needs to be reduced or eliminated until there is an effective way to ensure workers return to work when jobs are offered."

Just completely ignoring the pandemic already? Cool.

Joe
Wed, 06/24/2020 - 5:23pm

Not at all ignoring it. Just suggesting the extra benefit is impeding Michigan's economic recovery and hurting businesses trying to hire help. That's important, too.

Ridiculous
Wed, 07/15/2020 - 5:17pm

It is utterly ridiculous to ask taxpayers to pay people MORE to not work. Why should someone make more taxpayer money than if they were at work? The real solution here is to completely stop unemployment payments and get people back to work. Hunger is a great motivator to work.
Society will have to simply deal with the virus (and the tiny.2% mortality rate)