[Update August 9th] President Trump has signed a series of executive orders, one of which includes extending the weekly unemployment benefits payment (FPUC) to the end of the year. However as expected per the earlier update below, he is lowering the amount to $400 p/week and also making states fund 25%, or $100, of this payment. His order also raises the $1 of regular unemployment minimum requirement qualification threshold to $100 for eligible unemployed or underemployed claimants to get the extra $400 weekly unemployment benefit. The legality and ability of this executive order to go into effect is already under question and will likely be challenged in court, not to mention the time it may take states to implement these changes and funding model.
The following are the key clauses related to the unemployment executive order (Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019)
- Calling on States to use amounts allocated to them out of the CRF, or other State funding, to provide temporary enhanced financial support to those whose jobs or wages have been adversely affected by COVID-19. [Those eligible] should continue to receive supplemental benefits for weeks of unemployment ending no later than December 27, 2020
- Approve a lost wages assistance program that authorizes the [State] Governor to provide a $400 payment per week, which shall reflect a $300 Federal contribution, to eligible claimants from the week of unemployment ending August 1, 2020.
- Eligible claimants are those who receive, for the week lost wages assistance is sought, at least $100 per week in State Unemployment programs, [which include but are not limited to] Unemployment Compensation for Federal Employees (UCFE), Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA), Extended State Benefits (EB).
Given the legal and political challenges the executive order will face, I would not be banking on seeing the $400 in your bank account or debit card anytime soon. More than anything it will almost force Congress to act quicker to pass something more official to ensure the President does not take political advantage of this situation.
I will update this article as new information comes to hand. Please check back for updates or subscribe to get them delivered directly to you.
[Update – August 6th] At this stage the $600 extra weekly payment has expired and Lawmakers have yet to reach an agreement around an extension. The latest public proposals are shown below and here is an analysis of the impact of losing the $600 to people’s weekly incomes. Based on the stock market’s inexorable rise people are pricing in a likely extension sooner rather than later (otherwise consumer spending would crash) so stay tuned for what the final details may look like. The White house, is looking to get the Democrats and Republicans to compromise on a $400 weekly payment to year end, by making concessions in other areas of the latest stimulus package being negotiated.
[Proposals] Republicans have proposed a contentious extension to the weekly FPUC supplementary unemployment benefit under their recently released HEALS (health, economic assistance, liability protection, schools) Act. They are proposing to extend the current weekly FPUC unemployment benefit to the end of the year, but doing so in two phases as follows:
- They will cut the current supplementary $600 FPUC weekly payment to $200 per week. This straight line cut would be in effect till the end of September 2020 (or first week of October in some states based on their UIC payment schedule), in order to allow states to implement the second phase approach which ties wages earned before a job loss to the amount of supplementary unemployment benefits paid. The $200 payment would be on top of current state maximums and would have a disproportional effect on states like Florida and Arizona which already have low UIC weekly benefit amounts.
- In the second phase from early October 2020, the Republicans are proposing limiting the total unemployment benefit (supplementary + state amount) to 70% of an individual’s pre job-loss wages rather than a fixed weekly supplementary benefit as is currently in place. The maximum supplementary amount that could be paid would be $500. The calculation of the 70% threshold will be based on a federal Department of Labor formula or by a state proposing an approved alternative method. So for example Jack, who lives in California, was earning $800 p/week before he involuntarily lost his job. His UI payment under the Republican proposal would be limited to a maximum of $560. Assuming he was eligible against other criteria, he would then get the state maximum of $450 plus a supplementary amount $110 only. This compares to the $1050 ($450 + $600) he would get under the current FPUC program. A pretty significant difference.
- For contractors, gig wokers and freelancers this new approach would have a larger impact since consistently proving their income before the job loss will be a challenge. Further it will likely take state UI agencies several weeks to implement this new calculation method and verification processes, which is why $2 billion was included in the HEALS Act states to upgrade their UI systems.
The above counter proposal is in response to the Democrats HEROES act (details below, and passed in the House back in June) which proposed a straight extension of the $600 payment to the end of the year. While the parties are still far apart, the silver lining is that Republicans are finally on board with an extension. The reason the extension is low is purportedly because they want to encourage returning to work where wages would be higher than unemployment for most Americans. But the Democratic controlled house won’t likely accept such significant cuts with many pundits expecting a compromise to result in a supplementary $300 to $400 weekly amount (or an equivalent amount) till the end of the year.
This story is developing as both parties are going to have to compromise on a final extension. The main takeaway is that the $600 payment will be cut, but that the overall FPUC program will be extended to provided supplementary benefits.
[Prior Updates] The expansive pandemic unemployment provisions passed under the CARES act stimulus package have been widely acknowledged as the largest boost to individuals who lost their jobs as a result of the Coronavirus induced slowdown. In particular the extra $600 (FPUC) weekly payment on top of the regular state unemployment compensation has been by far the most effective part of the government’s economic policy response to the fallout from the Coronavirus induced recession and unemployment spike. For over 50 percent of jobless Americans the extra $600 and regular UI weekly payment more than replaced what they were earning from working.
While the debate rages along party lines on extending benefits, Trump administration officials and Congressional Republicans have strongly indicated they don’t want to extend the $600-a-week FPUC supplementary UI benefit past its current expiry at the end of July 2020. They feel the economy is improving and want to encourage workers to go back to work versus relying on the generous enhanced unemployment benefits. This is why they are pushing back-to-work bonus payments or reducing the extra weekly payment to somewhere between $200 and $400, and providing a temporary stipend to those who return to work.
House Democrats, led by Speaker Nancy Pelosi, on the other hand have reiterated the importance of the $600 weekly payment for the millions of unemployed by passing putting a new Stimulus bill in the House, called the HEROES act, which includes an extension of the $600 per week extra unemployment payment (FPUC) through to January 2021 as the current FPUC provisions approved in March are set to expire at the end of July.
There is little doubt that the $600 payment and other enhanced unemployment benefits – in addition the PUA covering those workers not normally eligible for state unemployment benefits or extending existing benefit coverage periods by 13 weeks (under PEUC) for those whose jobs or livelihood were impacted by COVID – will be a big boost to many households. However the roll-out of these new provisions and payment to recipients has been less than stellar to say the least, mainly because of decades of under-investment in the administrative capacity of state UI agencies and systems (many still using mainframes or home grown software) has left them incapable of flexibly in adjusting to the new provisions and determining the eligibility of newly covered worker groups. Even back pay for retroactive payments is taking far longer than planned.
A Compromise on Extending Unemployment Benefits?
It appears highly likely that the President and his administration will have to provide some level of support to the millions of unemployed workers given the resurgence of the Coronavirus in several states that has forced extended business closures. As such a Senate proposal by the Democrats called The American Workforce Rescue Act (AWRA), may provide a party line compromise that the president could get behind, particularly as the presidential election is only a few months away. The AWRA proposal would continue to provide the full $600 extra weekly unemployment payment as long as the states unemployment rate is above 11%. When it drops below 11% (based on a three-month average), it will start to phase out to $0 until the state’s unemployment rate drops below 6%. So essentially $100 less for every percentage drop between 11% and 6% of a state’s unemployment rate.
With the current provisions expiring in a few weeks, I expect that that Congress will eventually craft a bill to extend these UI benefits to the end of 2020 using a hybrid of one of the above proposals – which may well also include another 2020 stimulus check to cover those not eligible for unemployment benefits.
The table below shows the impact of losing the extra $600 weekly payment against the maximum weekly benefit amount (WBA) current paid by state unemployment agencies. As you can see, in several states it is pretty significant and the impact is much, much higher if you are not getting close to the maximum amount in your respective state.
|State||Standard UIC Max. Weekly Benefit||UIC WBA + $600||% UIC Income Lost|
|District of Columbia||$444||$1,044||135%|
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