Alternatives to Unemployment Benefits Boost Floated (Corrected)

May 28, 2020, 6:04 PM; Updated: May 29, 2020, 1:34 PM

Leading business groups are ramping up pressure on Congress to consider alternatives to House Democrats’ call to extend a $600 weekly unemployment insurance supplement, warning lawmakers that the expanded benefits make it difficult to bring back furloughed workers or hire for additional positions.

As another 2.1 million Americans filed for unemployment last week, bringing the total number of claims during the pandemic to more than 40 million, business groups like the U.S. Chamber of Commerce and the Retail Industry Leaders Association are lobbying lawmakers in an effort to jump-start formal talks over alternative ideas like a “back-to-work” bonus.

An early proposal from Sen. Rob Portman (R-Ohio) would allow workers claiming unemployment to receive a $450 weekly bonus if they return to work before the end of July. Larry Kudlow, director of the White House’s National Economic Council, signaled this week that the Trump administration may back a return-to-work incentive. Senate Majority Leader Mitch McConnell (R-Ky.) has made clear that extending the $600 supplement to regular unemployment benefits provided in the $2.2 trillion CARES Act is a non-starter for Republicans in talks on the next virus-relief package.

RILA, one of many business groups arguing that the $600 weekly benefits boost disincentivizes people from reentering the workforce, points to a model Georgia recently implemented as a potential framework for Congress to follow. On the Democratic side of the aisle, Senate Finance ranking member Ron Wyden (D-Ore.) has floated a plan to preserve the supplement initially but phase it out over time by linking it to the relevant state unemployment rate.

Members of both parties are mulling alternatives while trying to strike a balance between the need for a fast response—the expanded benefits expire at the end of July—and a proposal nuanced enough to account for differences between states, observers said. The partisan split over extending the expanded benefits is shaping up to be a major fault-line ahead of negotiations for the next aid package: Democrats view expanding jobless aid as a necessity for many Americans who have lost their livelihood, while most Republicans remain steadfast in the belief that continuing the additional aid is untenable because it gives many recipients more money than they earned before the pandemic.

“The fact that we have Democrats and Republicans recognizing and acknowledging the disincentive is a good thing,” said Isabel Soto, a labor market policy data analyst at the American Action Forum, a center-right think tank.

Early pitches to alter the boost ignore the fact that many workers are reluctant to return to work because of the potential for infection, not because they’re collecting the additional $600 a week, said Michele Evermore, senior policy analyst with the National Employment Law Project.

“With historically high unemployment, we aren’t worried about work disincentives” said Kate Bahn, director of labor market policy and an economist at the Washington Center for Equitable Growth. “The way to incentivize work is by providing safe working environments—that is the difference that would be most likely to affect someone’s work search effort.”

Hill Proposals

Portman’s plan would fund a $450 weekly back-to-work bonus by using resources set aside for the $600 supplement under the CARES Act. It would maintain the full $600 weekly benefit for those who are still unemployed.

“Regardless of how you feel about the $600 per week federal increase, we’re in a very different situation now than we were two months ago when we passed it,” Portman said in a Senate floor speech last week. “Now, we’re reopening all around the country. And again, small business people are telling me, ‘I’d like to get started again, but I can’t get the employees.’”

The U.S. Chamber is calling on lawmakers to squash any push to expand the $600 supplement. Neil Bradley, the group’s executive vice president and chief policy officer, told reporters last week that Portman’s idea “makes sense,” though the organization is still building consensus on what alternative it may fully endorse.

Portman’s concept focuses on aiding low-wage workers who will have a harder time reentering the workforce, Soto said. She contends there is no perfect policy fix, but said she believes a return-to-work bonus that is less than the current $600 benefit would likely be most successful at nudging people back into the workforce. The difference of a few hundred dollars in income—compared with eliminating the supplement—significantly affects the ability of low-wage earners to provide for themselves and their families, she said.

But some policy analysts, including Bahn, say the $600 boost is the most effective approach.

“By and large, the economic evidence points to the economic benefits of continued increased generosity of unemployment insurance, done through the additional $600 bonus,” Bahn said. “Re-employment bonuses are a solution in search of a problem: people who turn down suitable jobs lose their benefits.”

Economic Triggers

Wyden’s proposal would keep the $600 weekly benefit boost as long as the respective state’s three-month average unemployment rate exceeds 11%. It would reduce the benefit by $100 per week each time the state unemployment rate drops by a percentage point, until it phases out at 6%.

That idea hasn’t taken off with business groups, because they largely oppose maintaining the added federal assistance. But the proposal offers a needed buffer zone for workers and would help to prevent the economy from having to absorb the shock of tens of millions of people losing the extra benefits all at once, Evermore said.

“This is a way to use objective market-based criteria to drive the next decision on unemployment insurance—and you shouldn’t play politics with America’s economy,” Wyden said on a call with reporters earlier this month.

Wyden’s proposal offers different approaches for states that may need added benefits longer than others, yet it fails to address whether $600 is the right amount to continue giving workers, and could create logistical problems for states, Soto said.

“This, in some ways to me, seems like extending the benefit and potentially extending the problem that comes along with it,” she said.

RILA argues in a policy proposal it is circulating on Capitol Hill that the current supplement risks millions of people becoming defined as “long-term unemployed,” a problem that arose after the Great Recession when long gaps in work history posed a barrier for people landing new jobs.

State Action

The retail group pointed to Georgia’s new policy in urging Congress to mandate that any state that receives assistance for continued unemployment allow individuals to accept part-time work shifts without a reduction in benefits.

Georgia adopted an emergency rule allowing workers to earn $300 a week in wages and retain their full state unemployment benefits, plus the $600 boost. Earnings above $300 a week will be deducted from a person’s unemployment benefit.

“Although the job openings have slowed in some retail sectors, there are many leading retailers that are hiring hundreds of thousands of additional workers to keep up with demand,” RILA said, referring to Instacart announcing it plans to recruit up to 250,000 contractors in coming months.

In New Jersey, a similar proposal is awaiting the signature of Gov. Phil Murphy (D). That legislation, A4132, would allow workers to earn up to 40% of their weekly unemployment benefits without losing coverage, up from the current limit of 20%. Like the Georgia rule, the New Jersey change is designed as a temporary measure to bolster the finances of laid-off workers and help businesses bring back employees on a part-time basis.

“That certainly will be enough to incentivize people to want to find something, even if it’s part-time,” Soto said of Georgia’s system, adding that the next two months will provide a test of how effective the state’s policy is at moving people off the unemployment rolls.

(Corrects description of American Action Forum think tank in the sixth paragraph.)

To contact the reporters on this story: Jaclyn Diaz in Washington at jdiaz@bloomberglaw.com; Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editor responsible for this story: John Lauinger at jlauinger@bloomberglaw.com

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