Economists say people earning less than $32,000 can potentially make more from unemployment aid than from their previous jobs.
When it comes to free money, Americans may be getting too much of a good thing.
Under President Biden’s recently enacted $1.9 trillion American Rescue Plan, workers who lost their jobs to the pandemic shutdowns and scale-backs are now earning more in unemployment benefits than they did in wages. And that is stopping people from returning to work — just when employers are trying to reopen across the nation.
The unemployed are getting an extra $300 a week in federal benefits through Labor Day. That’s on top of state unemployment benefits averaging about $320 per week.
It all adds up to an average of $638 per week in combined federal and state unemployment payments. In 2019, that combined amount averaged out to $348 per week.
The payout had been $938 in April 2020, when Trump passed a temporary plan during the height of the pandemic that boosted weekly unemployment payments by $600 and also gave employed people one-shot stimulus checks.
That ran out in July and the unemployment boost was cut down to $300-a-week which runs through Sept. 6.
The unemployment payments work out to $15.95 an hour based on what would have been a 40-hour work week — more than double the federal minimum wage of $7.25 an hour.
The government’s generosity came under scrutiny from economists, business owners and lawmakers Friday after the Bureau of Labor Statistics announced that the U.S. economy added just 266,000 jobs in April, well below estimates.
According to economists at Bank of America, the combined unemployment benefits mean that anyone earning less than $32,000 a year can potentially receive more income from unemployment aid than from their previous jobs.
“We should be clear about the policy failure at work here,” Sen. Ben Sasse (R-Neb.) said in a statement. “
There are 7,400,000 jobs open in the US — but fewer than 300,000 people found new work last month. Why? This tragedy is what happens when Washington know-it-alls decide to pretend they’re generous by paying more for unemployment than for work. This obviously hurts our economy, but more precisely, this hurts people on every Main Street in the nation.”
Business groups also decried the disincentive to return to the workforce. “The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” said U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley.
“We need a comprehensive approach to dealing with our workforce issues and the very real threat unfilled positions poses to our economic recovery from the pandemic.”
“While Dems trap people in a cycle of fear & pay them NOT to work,” tweeted House Minority Leader Kevin McCarthy (R-Calif.), “it’s clear the best thing to do is end the crisis-era policies & get Americans back to work.”
At the White House Friday, Biden insisted that the effect of boosted benefits on the employment picture was “nothing measurable.”
Bradley said the Chamber of Commerce has found that the extra $300 from the feds results in “approximately one in four recipients taking home more in unemployment than they earned working” and called for an end to the benefit bump.
And at least two Republican-led states are attempting to take matters into their own hands.
Montana Gov. Greg Gianforte announced Tuesday that the state would reinstate pre-pandemic unemployment eligibility requirements beginning June 27. To sweeten the pot for workers, Gianforte offered a $1,200 “Return-to-Work Bonus” for those receiving unemployment as of this week who subsequently accept a job and complete at least four weeks of work.
South Carolina Gov. Henry McMaster followed suit Wednesday, announcing that his state would opt out of federal pandemic-related benefit programs at the end of June.
“South Carolina’s businesses have borne the brunt of the financial impact of the COVID-19 pandemic,” McMaster said in a statement. “Those businesses that have survived … now face an unprecedented labor shortage … What was intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic has turned into a dangerous federal entitlement, incentivizing and paying workers to stay at home rather than encouraging them to return to the workplace.”
Meanwhile, in California, Marie M., who asked that her full name not be used so her comments wouldn’t affect her job prospects, told the Associated Press she had pulled in around $30,000 in unemployment aid — about the same amount she earned working in 2019.
In July, Marie said, she plans to start looking for restaurant work again. Restaurants are already reaching out to her about jobs, so she feels she can afford to be more selective.
“Unemployment benefits have been like collective bargaining,” she said. “They made a union out of all of us.”