Submitted by Taps Coogan on the 24th of May 2020 to The Sounding Line.

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A recent study by the University of Chicago found that 68% of the 38 million Americans currently receiving unemployment benefits are eligible to receive more income from unemployment insurance than they earned at their former jobs, with the median worker receiving 134% of their former income. That is thanks to a CARES Act clause that created a $600-a-week supplemental check for anyone on unemployment insurance through July 31st. That is the equivalent to an annualized $31,000-a-year boost to standard unemployment benefits, which are typically around 50% of one’s prior income. (Here is a calculator to determine the payout in each state, including the $600-a-week boost)

Furthermore, the lowest one-fifth of wage earners are now making roughly twice as much money on unemployment insurance than at work and, in every state in the US, the majority of those on unemployment are making at least 120% of their former salary. In Montana, New Mexico, and Oklahoma, the median unemployment recipient is making over 170% of their prior salary.

There is an argument to make that the government mandated nature of the current economic interruptions justifies increasing unemployment benefits above the typical rates. It is also important to note that not everyone qualifies for unemployment insurance when they lose their job. Nonetheless, the situation where workers are making more on unemployment insurance than they were making at their jobs creates some highly concerning incentives. Not only is it unfair to colleagues who are still at work (and thus making less money), it is just about the strongest dis-incentive for a quick post-crisis return to work that one can think of.

Nonetheless, the boost in unemployment benefits is wildly popular and the political pressure is on to extend the $600-a-week boost to unemployment beyond July. The pressure is also on to grow the Payroll Protection Program as well as repeat the $1,200 stimulus checks on an ongoing basis.

Opposing such programs on the grounds that they are unfair to current workers, that they are exacerbating the largest fiscal deficit in history, that they will discourage a return to work, or that they will crush small businesses looking to rehire is not likely to be popular. ‘Vote for me and you’ll get less money’ just doesn’t have the ring of a viable political platform. Regardless of whether fiscal conservatives try such a platform or not, one must wonder whether expanded unemployment insurance and ‘helicopter money’ are here to stay in one form or another, one way or another.

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