February 25, 2024


business is good for you

millions fret as Republicans threaten to halt $600 weekly lifesaver

6 min read

If Donald Trump and Senate Republicans have their way, roughly a week from now, the US will swap an imagined economic problem for a predictably devastating one, economists have warned.

Related: 1.3m more file for unemployment as US economy continues to reel

To keep people safe at home during the pandemic and to support them during the resulting jobs crisis, Congress in March instituted a $600 boost to weekly unemployment insurance benefits. Unless lawmakers step in, the money stops on 31 July.

The money is an unusually robust benefit in a country with a weak social safety net. With it, researchers estimated somewhere between 40% and 68% of US workers could make more from unemployment than they did working, because of the high concentration of job losses in low-wage positions.

Republicans, as a result, have warned of hordes of people “disincentivized” from returning to work. But economists say the real crisis is what happens when those same people have $2,400 less each month to pay for bills, rent and groceries.

Sara Gard has been furloughed since April from her hospitality job, and said without the $600, she and her two children will be entirely dependent on her husband’s pay.

“It’s not going to cover everything, so what’s going to give? The house? The food?” Gard said.

Once it is safe to return to work, Gard has a job she loves waiting at a company she admires and has been with for 15 years. But without the $600 boost, she will have to give up the furlough protections to take a new job near her home in Atlanta.

“It is such a feeling of being caged and trapped, and every decision I can make is a bad one,” Gard said.

Gard, 39, is her family’s breadwinner, and she said she would return to her job for less money if it meant she could continue collecting the $600. An added stress for Gard is that at the same time the $600 expires, she is scheduled to also lose state unemployment insurance because of caps on how long people can collect it.

State unemployment averages $340 a week – a 44% replacement of the average worker’s wages. In states with the weakest unemployment benefits, that pay rate is 25% or lower than the average worker’s weekly wage. For people who haven’t already hit the caps, state unemployment is all they will be left with, unless Congress agrees on a replacement.

It is such a feeling of being caged and trapped, and every decision I can make is a bad one

Sara Gard

While the benefits deadlines loomed, Gard was also forced to decide by 10 July whether to send her two-year-old and five-year-old children to school or have them take classes online in the fall.

She tries to compartmentalize the different issues, but said: “It just stops working at some point, because every possibility ends in: if only someone had done something four months ago, I wouldn’t have to be trying to decide if I give up my kindergartner as tribute or what? Or decide that I’m going to not work, but if I do that, do I lose my house? Everything is one domino touching another. It’s just awful.”

The domino effect goes beyond Gard’s family. More than a million people have filed new unemployment claims each week for 16 weeks – women, particularly women of color, are bearing the brunt of the losses. When millions of families have less money to spend, it strains the country’s economy.

Abruptly ending the expansion could cost 2 million jobs by the end of the year, economist Jason Furman warned a House committee in June. The Economic Policy Institute estimated 5 million jobs could be lost by July 2021 if it is cut.

There is also a public health threat if people are forced to return to work in a pandemic which has killed more than 137,000 Americans because they can’t get by without unemployment benefits.

For safety reasons, Samantha Acuna would like to be at home. She is instead working on-call shifts as a cocktail server at a casino pool in Las Vegas where customers are not required to wear masks.

She lives with her parents and her mother has asthma, but people can’t turn down the job they had before the pandemic and still collect benefits, unless they meet specific guidelines.

Acuna gets the $600 boost pro-rated to the days she doesn’t work, but if that money disappears, she’ll have to find a full-time job so she can continue to pay for rent, her car, student loans and phone bills.

“The pandemic is just going to get worse if we don’t pay attention to it,” Acuna said. “So I would just rather keep that income so I could be home and this could all just finish quicker.”

Democrats have introduced legislation that would extend the program, with limits. Republicans have said they are against the $600, but have not said what they would replace it with.

Both parties have been on a two-week recess which ends on Friday – two weeks before the program’s official expiration on 31 July. For most people, however, payments actually stop a week earlier.

The $600 expansion is far from perfect, but it is a welcome solution in a country with antiquated and underfunded unemployment systems, which have left millions without benefits months after filing claims. In Alabama, people slept overnight in a parking lot so they could speak with a representative from the state’s unemployment agency.

Michele Evermore, senior policy analyst at the not-for-profit National Employment Law Project, said: “We’ve systemically gutted every other piece of the social safety net, unemployment insurance too.”

Evermore said since the last recession, state governments have made benefits more difficult to access and reduced the amount of benefits. The Cares Act, which included the $600 expansion, papered over these problems.

Without it, they are likely to come back in full force.

“When systems are set up with the aim of catching people, trapping people, cutting off people, you can’t just turn that around overnight when you want to pay benefits quickly,” Evermore said.

She said the persistent myth that people collect unemployment to take advantage of the system ignores how important the benefit is for the national economy. “This is a system that has been undermined for a while, and this is the moment we can use to put in place permanent reforms, now and forever,” said Evermore.

Research published in June by the Federal Reserve Bank of Chicago found people receiving normal unemployment benefits “search more intensely for work” than unemployed people who don’t receive them. “During the current economic climate, one could expect a greater share of the unemployed to receive UI [unemployment insurance] benefits and to search more intensely for work,” the article said.

Related: How will we know the US economy is recovering? Here are my key metrics | Gene Marks

In mid-March, Karen Kent was laid off from her job as a cafeteria worker in New Jersey. She has been looking for jobs because without the $600 she will have to find work. But so far, her searches have only turned up jobs with direct customer contact, something she can’t face because she has asthma and a heart condition.

The $600 has been a “lifesaver” for Kent, 47. Her husband is still working, but it is not enough to support the family. He also lost a part-time job at a restaurant which he had so his family could get dental insurance.

“This was starting to give me a foot back in the door to have hope, I felt like I was working towards something, and they just want to take it away,” Kent said. “I work hard. I am a workhorse.”

Kent is a fighter. She corners politicians at public events and rallies people on social media, but she is concerned that the situation she and others face is not reaching the political class. Kent said: “I feel like they need the working class, but we’re getting beaten down.”

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