Congress must reinstate the extra $600
Summary
A Working Economics Blog post by Heidi Shierholz, posted August 27, 2020, argues that Congress must reinstate the extra $600 in weekly unemployment insurance (UI) benefits. It says last week 1.4 million workers applied for UI benefits, including 822,000 for regular state UI (not seasonally adjusted) and 608,000 for Pandemic Unemployment Assistance (PUA). The post says Republicans in the Senate allowed the across-the-board $600 increase to expire and that last week was the fourth week recipients did not get the extra $600. It calls the president's executive memorandum a false promise and says the spending made possible by the $600 was supporting 5.1 million jobs.
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“Congress must reinstate the extra $600.”
Original at docs.house.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/hhrg-116-vc00-20200901-sd402-bd429f1ef2fd-71f204d4a7/
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Working Economics Blog
Posted August 27, 2020 at 10:00 am by Heidi Shierholz
UI claims remain historically high and the
president’s executive memorandum is doing
more harm than good
Congress must reinstate the extra $600
Last week 1.4 million workers applied for unemployment insurance (UI) benefits. Breaking
that down: 822,000 applied for regular state unemployment insurance (not seasonally
adjusted), and 608,000 applied for Pandemic Unemployment Assistance (PUA). Some
headlines this morning are saying there were 1.0 million UI claims last week, but that’s not the
right number to use. For one thing, it ignores PUA, the federal program that is serving millions
of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally
adjusted data, which is distorted right now because of the way Department of Labor (DOL) does
seasonal adjustments. One bit of good news is that with today’s release, DOL announced that
starting next week, they will be changing the way they do seasonal adjustments. The change
should address the issues that have plagued seasonally adjustments during this pandemic.
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits
to expire. Last week was the fourth week of unemployment in this pandemic for which
recipients did not get the extra $600. That means people on UI are now are forced to get by on
the meager benefits that are in place without the extra payment, benefits which are typically
around 40% of their pre-virus earnings. It goes without saying that most folks can’t exist on
40% of prior earnings without experiencing a sharp drop in living standards and enormous
pain.
Earlier this month, President Trump issued a joke of an executive memorandum. It was
supposed to give recipients an additional $300 or $400 in benefits per week. But in reality,
even this drastically reduced benefit will be extremely delayed, is only available for a few weeks,
and is not available at all for many. The executive memorandum is a false promise that
actually does more harm than good because it diverts attention from the desperate need for the
real relief that can only come through legislation.
/
This is cruel, and terrible economics. The extra $600 was supporting a huge amount of
spending by people who now have to make drastic cuts. The spending made possible by the
$600 was supporting 5.1 million jobs. Cutting that $600 means cutting those jobs—it means
the workers who were providing the goods and services that UI recipients were spending that
$600 on lose their jobs. The map in Figure B of this blog post shows many jobs will be lost by
state now that the $600 unemployment benefit has been allowed to expire. We remain 12.9
million jobs below where we were before the virus hit, and the unemployment rate is higher
than it ever was during the Great Recession. Now isn’t the time to cut benefits that support jobs.
Last week was the 23rd week in a row that initial unemployment claims were far greater than
the worst week of the Great Recession. If you restrict this comparison just to regular state
claims—because we didn’t have PUA in the Great Recession—last week was the 23rd week in a
row that initial claims have been greater than the third-worst week of the Great Recession. And
initial claims (including both regular state benefits and PUA) have risen in the last two weeks.
This is not the direction we want to be seeing 23 weeks into this crisis.
Though initial claims have risen the last 2 weeks, they’re below where they were when the $600
expired. Some are wondering if that decline was a result of the $600 running out. The answer to
that is an emphatic no. Initial claims remain historically high, but they have been fairly steadily
dropping since their peak in early April, and what has happened since the $600 expired is just a
continuation of those trends.
In other words, the $600 was not the reason people were applying for unemployment insurance
and it is not what was keeping people out of work. In fact, rigorous empirical studies show that
any theoretical work disincentive effect of the $600 was so minor that it could not even be
detected. For example, a study by Yale economists found no evidence that recipients of
more generous benefits were less likely to return to work, which is what we would expect to see
if the extra payments really were a disincentive to work. And a case in point: in May/June/July
—with the $600 in place—9.3 million people went back to work, and a large share of likely UI
recipients who returned to work were making more on UI than their prior wage. The extra
benefits did not stop them from going back. A job offer is too important at a time like this to be
traded for a temporary increase in benefits, and when commentators ignore that, they are
ignoring the realities of the lives of working people. Further, there are 11.2 million more
unemployed workers than job openings, meaning millions will remain jobless no matter what
they do. Dropping the $600 cannot incentivize people to get jobs that are not there. Even
further, many people are simply unable to take a job right now because it’s not safe for them or
their family, or because they have care responsibilities as a result of the virus. Dropping the
$600 cannot incentivize them to get jobs, it is just causing hardship.
Dropping the $600 is also exacerbating racial inequality. Due to the impact of historic and
current systemic racism, Black and brown communities have seen more job loss in this
recession, and have less wealth to fall back on. They are taking a much bigger hit with the
expiration of the $600. This is particularly true for Black and brown women and their families,
because in this recession, these women have seen the largest job losses of all.
/
Figure A combines the most recent data on both continuing claims and initial claims to get a
measure of the total number of people “on” unemployment benefits as of August 22. DOL
numbers indicate that right now, 28.8 million workers are either on unemployment benefits,
have been approved and are waiting for benefits, or have applied recently and are waiting to get
approved. But importantly, Figure A provides an upper bound on the number of people “on” UI,
for two reasons: (1) Some individuals may be being counted twice. Regular state UI and PUA
claims should be non-overlapping—that is how DOL has directed state agencies to report them
— but some individuals may be erroneously counted as being in both programs; (2) Some states
are likely including some back weeks in their continuing PUA claims, which would also lead to
double counting (the discussion around Figure 3 in this paper covers this issue well).
FIGURE A
DOL reports that 28.8 million workers are either on
unemployment bene ts or have applied and are waiting to see
if they will get bene ts
August 22, 2020
Total: 28.8 million
1.9 million
1.1 million
11.0 million
0.8 million
13.9 million
Other programs (mostly PEUC, STC, and EB)
PUA: Initial claims
PUA: Continued claims
Regular state UI: Initial claims
Regular state UI: Continued claims
Notes: This is an upper bound on the number of people "on" UI, for two reasons: (1) regular state UI and PUA claims
should be nonoverlapping—that is how DOL has directed agencies to report them—but some individuals may be
erroneously counted as being in both programs; (2) some states are likely including some back weeks in their
continuing PUA claims, which would also lead to double counting.
Source: Department of Labor (DOL) Unemployment Insurance Weekly Claims (News Release), retrieved from DOL,
https://www.dol.gov/ui/data.pdf, August 27, 2020.
Figure B shows continuing claims in all programs over time (the latest data are for August 8).
Continuing claims are more than 25 million above where they were a year ago. However, the
above caveat about potential double counting applies here too, which means the trends over
time should be interpreted with caution.
/
FIGURE B
Continuing unemployment claims in all programs
January 4, 2020–August 8, 2020
40,000,000
Other programs (mostly PEUC, STC, and EB)
PUA
Regular state UI
30,000,000
20,000,000
10,000,000
0
Jan 2020 Mar 2020 May 2020 Jul 2020
Notes: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are out of work because
of the virus but who are not eligible for regular state unemployment insurance bene ts (e.g. the self-employed).
"Other programs" includes PEUC, STC, EB, and others; a full list can be found in the bottom panel of the table on
page 4 at this link https://www.dol.gov/ui/data.pdf.
Source: U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from Department of Labor
(DOL), https://oui.doleta.gov/unemploy/docs/persons.xls and https://www.dol.gov/ui/data.pdf, August 27, 2020.
/
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