With millions of Americans still unemployed and getting enhanced unemployment benefits, there’s been a lot of debate on whether to extend the current federally funded extra unemployment benefits ($600 FPUC, 13 week to 39 week PUA/PEUC) or as some would prefer provide a back-to-work bonus instead to encourage people to start looking for work. The main reason for this is that the current $600 FPUC payment on top of existing state UI benefits in many cases provides more income than what employees would could get by returning to work. Further several states have waived the need to be available for work to get UI benefits due to the COVID crisis and associated unemployment provisions.
Many who support extending current and enhanced unemployment benefits argue that back-to-work bonus’ won’t help many people because jobs are simply not available. And by removing these benefits many unemployed Americans would go back to living below the poverty line and be unable to pay bills rent and meet basic living needs. This would subsequently have a detrimental impact to state and local economies. Those who argue against extending enhanced unemployment benefits and instead prefer a back-to-work bonus say that a true recovery can never really start unless people are encouraged to go back to work and not rely on state or federally funded subsidies.
Not surprisingly the debate is divided along political party lines. The Trump administration and Congressional Republicans, according to economic advisor Larry Kudlow, don’t want to extend the $600-a-week FPUC supplementary UI benefit past its current expiry at the end of July 2020. They support a temporary, federally funded, cash bonus to those who find work. Democrats on the other hand want to extend the $600-a-week payments until 2021 or tie any reduction in benefits to the prevailing unemployment rate.
While no specific back to work bonus proposals are in Congress for review some options being floated include:
- Replace the $600 weekly UI checks with temporary payments of $450 a week plus their regular wages for those who return to work. The temporary payments would last for 2 to 4 weeks.
- Workers who accept a job offer keep two weeks’ worth of $600 enhanced unemployment benefits. Normally, if someone finds work, they would lose their unemployment benefits, so this carrot essentially provides a $1200 bonus.
Some states are already forging ahead with programs to encourage workers back to work. Idaho has already instituted a scheme to pay jobless residents a one time $1,500 payment to lure them back to work and off unemployment benefits. The state is directing $100 million from the $1.25 billion it received in federal CARES program that could benefit up to 70,000 residents.
So while debates will rage at the federal level on extending enhanced UI benefits versus promoting return-to-work programs, my bet is many states struggling with managing and paying unemployment claims (e.g. Florida, Ohio, Georgia) will start redirecting federal funds to encourage workers to return to work. The only question is, will they have jobs to go back to?
This article was updated on June 16