Extra unemployment benefits stymie hiring?
By TIM BECK
March 2020, the federal government passed the Coronavirus Aid Relief and Economic Security Act (CARES), which included an incremental $600 per week of federal unemployment benefits to enhance unemployment benefits of workers impacted by the pandemic. The CARES Act covered gig workers and certain employees working part-time, who might not receive coverage from their state’s unemployment program. $600 per week is equivalent to $15 per hour for a 40-hour week.
The original timeframe under the CARES act called for the benefits to be paid through July 31, 2020. In June 2020, the Congressional Budget Office provided their assessment of the effect of extending the $600 per week benefit from July 31, 2020, to December 31, 2020. Some key facts set forth in the CBO’s letter are:
“Roughly five of every six recipients would receive benefits that exceed the weekly amounts they could expect to earn from work during those six months.”
“The estimated effects on output and employment are the net results of two opposing factors. An extension of the additional benefits would boost the overall demand for goods and services, which would tend to increase output and employment. That extension would also weaken incentives to work as people compare the benefits available during unemployment to their potential earnings, and those weakened incentives would in turn tend to decrease output and employment.”
In the summer of 2020, the $600 weekly federal benefit was extended through Dec. 31, 2020. Congress then passed an additional piece of legislation that included a provision to extend the federal benefit through Labor Day, but at a reduced rate of $300 per week.
During 2021, at least 25 states ended their participation in the program. Many businesses continue to struggle to hire employees as the companies attempt to re-open their businesses.
In May, as the country began to recover from the coronavirus pandemic, there were 9.2-million job openings in the U.S. That number is slightly higher than the number of people who were unemployed.