“The United States is not known for its generosity
to the unemployed. But the coronavirus crisis has transformed
our system for compensating jobless workers. As tens of millions of workers suddenly
became unemployed, Congress passed an expansive
relief package with an unprecedented $600-per-week supplement
for jobless workers. The goal was to replace their wages so they could survive
the economic lockdown.
“As a result, though, many people
may now be eligible for substantially more money while unemployed than they
made while they were working. A new analysis by Peter Ganong, Pascal Noel and Joseph Vavra,
economists at the University of Chicago,1 uses
government data from 2019 to estimate that 68 percent of unemployed workers who
can receive benefits are eligible for payments that are greater than their lost
earnings. They also found that the estimated median
replacement rate — the share of a worker’s original weekly salary that is being
replaced by unemployment benefits — is 134 percent, or more than one-third
above their original wage. A substantial minority of those workers,
particularly in low-wage professions like food service and janitorial work, may
end up receiving more than 150 percent of their previous weekly salary.2
“The research underscores one of the
central — and most politically explosive — tensions of our economic crisis:
What’s the best way for our battered unemployment insurance system to keep
jobless workers afloat during a historic downturn with no end in sight?
“The idea behind a $600 payment was
simple: In 2019, the national average unemployment payment was $370 per week
and the national average salary for unemployment recipients was $970 per week.3 The
additional $600 per week is meant to make
up the difference, providing enough money on a weekly basis to fully replace
the average unemployment recipient’s salary. Other analyses of estimated average
wages and unemployment benefits have already shown,
though, that replacement rates likely vary quite a bit by state.
“But looking at average wages
doesn’t tell the whole story, because the country’s significant income
inequality means that more workers fall into lower-wage categories. To address
that problem, the new analysis simulates benefits for the median — rather than the mean — unemployment-eligible worker, drawing on
Census Bureau labor supply data.4
“This data comes with a few
important caveats. One is that because government data lags, the sample of
workers the researchers drew on for the analysis does not reflect the much
larger pool of people who are unemployed right now. If anything, Ganong told
me, that means the researchers’ estimates may understate how many unemployed
workers will be eligible to receive more than their original salary during the
current crisis, since the effects of the economic shutdown have disproportionately hit lower-income
workers.5 Plus,
the fact that workers are eligible for unemployment insurance doesn’t mean they
have the benefits yet. Delays in applying for and receiving unemployment
payments have been widely reported across
the country, and some workers are still
struggling to get through their state’s system.
“The analysis illustrates how something
that seems like a simple proposition — replacing jobless workers’ salaries
while a public health threat persists — is not something our unemployment
insurance system was built to do quickly or easily. Most of the experts I spoke
with agreed that back in March, when the unemployment insurance expansion
passed, a flat payment was the most feasible solution. Unemployment benefits
are always inconsistent across states, though, since each state sets its own rates.
And now, those inequalities are even more pronounced. The median
unemployment-eligible worker in Massachusetts is eligible for an estimated 125
percent of her former salary, compared to 166 percent in Mississippi.
“The researchers uncovered other
kinds of inequality, too. In some professions, like janitorial work, people who
are employed by essential businesses are continuing to show up to
their jobs under hazardous conditions. But in doing so,
they may be eligible for less money than janitors who have been laid off or
furloughed by a nonessential business. In an ideal world, Ganong said, the
people who have kept working at hospitals or grocery stores would be receiving
some kind of hazard pay. ‘But that’s generally not the reality, which means
there’s a weakness in the current system,’ he said. ‘We’re giving more money to
certain workers to stay home than to other workers who are putting themselves
at risk by going to work.’
“Several economists and unemployment
insurance experts reviewed a draft of the analysis at FiveThirtyEight’s
request. Many were surprised by the number of workers estimated to be eligible
for unemployment benefits that exceeded their original wages. ‘I think we all
knew that some workers were going to be getting more than their original
earnings,’ said Michael Strain, the director of economic policy studies at the
right-leaning American Enterprise Institute. ‘I would not have guessed that it
was quite this many workers, but I certainly think that it’s a completely
plausible figure.’
“The question is whether this will
be a problem as the economy starts to reopen. In addition to the inequality
inherent in possibly replacing some workers’ wages at a higher rate, it might
not make financial sense for workers to search for other jobs or even return to
their original jobs if they’re making substantially more money by staying home.
Some experts don’t see that as a bad thing — in fact, to some, providing an
extra incentive to stay home during a pandemic might be a feature, not a bug. ‘My
bigger worry is that workers will feel pressured to go back to an unsafe job,’
said Michele Evermore, a senior policy analyst at the left-leaning National
Employment Law Project. But it could also make it more difficult for businesses
to convince their workers to return — at least, at the salaries they were being
paid before.
“A fight is already brewing on
Capitol Hill about whether the $600-per-week payment should be continued after
it expires at the end of July. House Democrats have argued that it’s working
well, and proposed a straightforward
renewal of the existing payment as part of a bigger
relief package. Republicans, meanwhile, are pushing for a cap on benefits or
a bonus for workers who return to
work. Another option, Ganong and his coauthors point out, is
for the federal government to provide workers with a percentage of their lost
wages that, combined with state unemployment insurance payments, would come
close to replacing their original salary.
“But that would require a more
complex calculation by state unemployment insurance agencies — one they might
be unwilling or unable to implement. ‘In a perfect world, I would prefer to
give people a percentage of their income,’ said Heidi Shierholz, a senior economist
at the left-leaning Economic Policy Institute. ‘But we might not be set up to
do it.’ Many state unemployment insurance agencies are still using decades-old
computer systems, for example, presenting potential technical
challenges if Congress asked them to change the benefits formula. And Daniel
Zeitlin, the director of policy at Washington state’s unemployment office, said
that while he didn’t think it was impossible, any change would be difficult for
a system already under tremendous stress.
“Another route is to simply reduce
the fixed bonus payment when the $600-per-week benefit expires, or — as some Democratic politicians
have proposed — phase out the benefit as social
distancing requirements are eased and the unemployment rate starts to go down.
Ramping down to a payment as small as $100 or $200 each week would still be
generous by historical standards, according to Gabriel Chodorow-Reich, an economist
at Harvard University. And it would continue to provide some kind of buffer for
workers who have trouble finding jobs.
“Simply reducing the payment could
end up exaggerating the lopsidedness rather than fixing it, though. According
to the University of Chicago team’s analysis, halving the payment to $300 per
week would still mean that 42 percent of unemployed workers would be getting
more than their original wages — and some people would be receiving a smaller
fraction of their previous salary. A $300 weekly payment would leave
one-quarter of unemployed workers with replacement rates below 60 percent. ‘Lots
of people who earn more than the average or median wage are still living
paycheck to paycheck,’ Shierholz said. With a lower replacement rate, some of
those people might start to struggle to pay for necessities like rent or
groceries.
“So if Congress opts to extend the
expanded unemployment insurance program past the end of July, politicians will
have to decide how much an unevenly distributed benefit really matters,
particularly as public health concerns continue to loom. And the fate of the
next phase of relief to jobless workers may hinge in part on what state
unemployment insurance agencies can actually do. ‘It looks like health concerns
are going to prevent a fast recovery, so it makes sense to keep a substantial
boost to replacement rates,’ Chodorow-Reich said. ‘In an ideal world, the next
round of funds will probably be more tailored to workers’ individual
circumstances. The question is whether our totally antiquated systems will be
capable of pulling that off.’”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.