A CARES Act Failure: Unemployment Pays More Than Essential Work

Capitol Hill in Washington, D.C. Photo by Dallas Epperson.

In difficult times, generosity should always be viewed favorably- unless this generosity comes at the cost of a number of equally important imperatives: economic and fiscal recovery, fairness, and equitable distribution of public resources.

As the COVID-19 pandemic ravages humanity with hundreds of thousands of deaths globally, millions of cases around the world, and trillions of dollars of lost economic output, the United States continues to test policies that can counter its devastation. One such policy is the Coronavirus Aid, Relief, and Economic Security (CARES) Act which was passed in March.  

At first glance, the $600 per week allocated to unemployed individuals through a provision of the CARES Act seems to be a reasonable way to support those who are being laid off, through no fault of their own, during the disastrous and unforeseen pandemic. However, this amount being paid out in addition to standard unemployment insurance benefits can be seen as unsustainable and quite troubling when examined more closely.

To first share a widely accepted fact, the $600 supplemental payout makes it so that, on average, workers in most states can now collect more during their time of unemployment than they previously earned while working. Pre-coronavirus, people’s total unemployment compensation hardly matched half of their employment salary; in addition, part-time and self-employed workers were not eligible for unemployment funds as they are now.  Although the intention of this payout is to ease pressure in the midst of a pandemic which is a commendable goal, the CARES Act incentivizes a significant number of people to remain unemployed in an unprecedented way and disincentivizes a return to normalcy in the job market. There are a number of negative consequences to the broader economy which seem to outweigh the benefits. For example, small businesses in some states that are reopening have already reported trouble in getting unemployed workers to return to their jobs. One story shares that a worker in Pennsylvania made $577 weekly before tax, but now makes $888 as an unemployed individual; an increase of 54% per month. Yet another outlet reports on a small business owner who would like to reopen her business but struggles to do so because her truck drivers earn between $150-$250 more on their unemployment check every month than they did while employed with her business. These additional funds are not coming out of the pockets of employers; they are coming from government funds and contributing to the deficit at a time when our national debt has already reached an astounding $26 trillion dollars.

As per many states’ Departments of Labor, individuals are generally not eligible for unemployment benefits if they decline to return to their old jobs; however, there are many exceptions and the process of rescinding benefits during the pandemic is not obvious. A few ways an individual can decline work but still maintain benefits is by claiming “hazard in the workplace,” sharing pre-existing conditions or health risks, or claiming caretaker status. Beyond the number of legitimate reasons one can use to decline work, empathetic former employers may also choose not to report individuals who turn down employment. 

This CARES Act payout is problematic and detrimental to our economy for a number of reasons. To begin with, we should not be paying unemployed individuals more than they earned when they were employed - this is unjust and discouraging to workers who continue to show up to their jobs every day and serve society. Consider one analysis which finds that "the break-even point - below which a worker would make more money on unemployment, and above which it would pay to keep working - differs widely among states... that break-even is roughly $60,000 in Pennsylvania and $45,000 in Florida." A significant percentage of underpaid essential workers (for example, transit workers, grocery store workers, and caregivers), earn even less than these amounts and therefore less than they would if they were unemployed. It seems very unjust to ask these individuals to work a full week but then pay them less than some jobless individuals. This argument becomes even more obvious when layered over the fact that there many ‘essential worker’ jobs that remain vacant, with employers including the postal service, hospitals, eataries, and local Department of Transportations all hiring. But why would anyone apply for such roles when they would actually lose money?

To be clear, I understand that nobody ultimately "benefits" from the COVID-19 pandemic, nor did anyone choose to lose their job as a result of it.  Unemployment is painful and difficult for anyone to manage, no matter how much the government tries to help. However, I believe that current policy makes it extraordinarily tempting to remain unemployed rather than become an essential worker or return to a former employment that might pay you less. If unemployed individuals are in no rush to get back to work alongside our active labor force, America's growth will tumble even further. For the sake of our economy, not even in a period of disaster should we incentivize unemployment for an extended period of time. 

In contrast to current policy, helping workers find ways to adapt to a “new normal” is more important than ever. The U.S. has already allocated six trillion dollars towards the COVID-19 crisis and the country cannot realistically distribute benefits at its current rate until a vaccine is discovered. Instead, we can help the economy restart and spend a portion of the CARES Act weekly payout amount to ensure the public has adequate access to masks, hand sanitizers, and resources that help workers adapt to current realities. Of course, precautions are critical and workers who have been able to work from home should continue to do so. 

The reasons I have outlined above explain why I believe a 'blanket' $600 per week unemployment supplement is untenable and damaging for our workforce. The CARES Act provision is currently set to expire on July 31, and as policymakers enthusiastically debate our second stimulus package (the current Heroes Act bill, passed by the House, includes six additional months of unemployment benefits), I argue that this benefit cannot simply be extended to the next package in its current form. In the next stimulus package’s initial stages, perhaps the total amount an unemployed person receives can match but not exceed their prior employment income (up to $600 per week on top of standard unemployment benefits). In the months that follow, this benefit should be phased out entirely so that essential jobs are filled and the economy can begin to slowly restore its former strength. 

Kavi Patel is pursuing her Master of International Affairs at SIPA, concentrating in International Finance and Economic Policy. She was born and raised in Central Jersey and enjoys reading biographies and practicing foreign languages. 

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