As Congress gears up to debate the new, Republican-authored COVID-19 relief package, you’re going to hear a lot of debate over whether the existing $600/weekly enhanced benefit (set to be expire this weekend) should be replaced with a far less generous plan reducing those benefits to an extra $200/week until states can implement a system that will pay out benefits based on 70 percent of a worker’s prior wages.
One of the biggest arguments deployed against the current arrangement by Republican critics (Notably, President Donald Trump and Senate Majority Leader Mitch McConnell, R-Ky.) is that the more generous arrangement is a disincentive to seeking work since some people will make more by staying home than by going back to work. It’s a variation on a decades-old GOP argument to dismantle the safety net.
But a new Yale University study, released Tuesday, knocks the legs out from under that shopworn argument, concluding that there’s “no evidence that the enhanced jobless benefits Congress authorized in March in response to the COVID-19 pandemic reduced employment.”
If the doomsaying predictions of critics had been true, “the data should show a significant drop in employment in the week after the CARES Act took effect; it should also show subsequent decreases in relative employment as workers with more generous unemployment benefits put off returning to work. The data did not yield results that support these predictions. ”
Instead, the report concluded that “workers receiving larger increases in unemployment benefits experienced very similar gains in employment by early May relative to workers with less-generous benefit increases. People with more generously expanded benefits also resumed working at a similar or slightly quicker rate than others did.”
In reaching their conclusions, researchers took a look at mostly small businesses that require time clocks for their day-to-day operations. The majority were bars, restaurants and retail operations, where workers earn relatively low hourly wages. And “while the data does not represent the entire U.S. labor market, it captures a segment of it that has been disproportionately affected by the pandemic,” the report notes.
And that’s the key thing to note here: While millions of workers across the country have been hit hard by the pandemic’s economic fallout, workers at the lower end of the wage scale have borne the brunt of it.
Writing for Forbes in May, Shahar Ziv said Trump and Republicans weren’t even asking the right question about any disincentive to employment the expanded benefit might or might not have provided. In fact, “for the majority of Americans, there is no actual choice between collecting unemployment benefits and returning to work. This means that the question of whether benefits disincentivize work isn’t germane,” Ziv wrote.
Instead, policymakers should consider what would happen if the unemployment top-up isn’t extended (one researcher found it would result in a 50-75 percent wage cut for impacted workers), and “there isn’t enough labor demand to hire the unemployed? That answer is a lot scarier,” Ziv wrote.
Then again, this is the GOP-controlled U.S. Senate, which isn’t exactly known for playing the long game when it comes to the plight of American workers.
John Micek is Editor-in-Chief of the Pennsylvania Capital Star, a States Newsroom sibling of the Georgia Recorder.