GOP lawmakers are considering reducing unemployment benefits to as low as $200 per week to encourage Americans to look for jobs and mitigate the unprecedented surge in federal spending.
Republicans argue that the $600 per week currently offered is keeping people at home because it’s more money than many workers would earn at their jobs. Democrats insist the benefits will spur economic growth.
According to federal data, the $600 per week benefit combined with state benefits is more money than what 68% of unemployed workers eligible for those benefits made at their jobs.
I know several people in my personal life who have quit their jobs or dropped to part-time work to collect unemployment benefits. This trend exposes serious flaws in the system and proves that a large percentage of people will choose to stay unemployed if given the chance.
The $600 per week federal lifeline is set to expire July 31st, but House lawmakers have already approved a $3 trillion package to extend those benefits through the end of the year. Senate Majority Leader Mitch McConnell is hoping to pursue a smaller package worth $1 trillion.
Republicans are also looking to reduce the amount of unemployment cash offered to individuals who were high-earners before the pandemic and to limit the next round of stimulus checks to low-income individuals.
President Trump wants to add a payroll tax cut and liability protections for businesses in the next COVID-19 relief legislation.
In the meantime, as many as 20 million Americans who are still working have faced pay cuts or logged fewer hours as businesses struggle to remain afloat during the pandemic. According to ADP data, a majority of pay cuts will affect the top 40% of wage earners. Surveys suggest Americans won’t look for better jobs, as they believe they have a less than 50% chance of finding a better-paying job within the next three months.
“We have an income crisis that is even larger than a jobless crisis,” says Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth.
According to mortgage data company Black Knight, as many as 4.3 million American homeowners missed their mortgage payments in May (the highest since 2011). Food banks throughout the country have seen their demand increase by up to 50%.
As noted by former Labor Department official Jane Oates, smaller paychecks threaten to exacerbate the coming economic recession as Americans use their money for bills, groceries, and other necessities.
“The speed of recovery is really directly aligned to how consumers are behaving,” says Oates. “And if people don’t have money, they’re not spending it.”