Coronavirus / Employment

Increased Unemployment Benefits Hurt Employers in Need of Employees

unemployed

Man is filling in Unemployment claim form.

By: Alex Ayers

Congress recently passed over $2 trillion in stimulus spending via the Coronavirus Aid, Relief, and Economic Security (CARES) Act. To support workers hurt by the COVID-19 pandemic the bill expanded unemployment benefits by $600 per week to every state that participates in the program. With this expansion the economy could face a slower recovery period as the workforce may want to take the higher cash benefit compared to salaries from their employer.

Millions of recently unemployed Americans need relief from the economic hardship caused by this pandemic. In some situations, the expanded benefits will be beneficial to the future of Americans, but for many businesses it could decrease worker availability. For employers looking to maintain full employment, there are several options available from the CARES Act to keep workers working. The Paycheck Protection Program offers businesses loans to cover 8 weeks of payroll, mortgage interest/rent, and utility expenses that will be forgiven if the business maintains the number of employees and wage rates or rehires furloughed employees by June 30. Qualifying businesses facing significantly lower demand can also utilize retained worker tax credits for partial credit for employee wages up to $10,000. Unfortunately, the unemployment benefits recently put in place may exceed the weekly amount workers were getting paid prior to the virus, providing many with a disincentive to return or stay at work. This could primarily affect small and oftentimes family-owned businesses that cannot manage to produce the appropriate amount of output to survive without the necessary labor. Now, when the economy reopens employers will be in competition with the welfare state rather than market competitors.

Furthermore, there are potential consequences for workers that seek to receive unemployment benefits. Workers who take unemployment that are not laid off will lose their health insurance coverage. Former employees can stay on group insurance plans through COBRA; however, the employee must cover the employer portion of the insurance plus a 2% service charge. According to data gathered by the Pew Charitable Trust, the median employer portion of healthcare premiums is $574 per month. With the 2% surcharge an employee would be required to pay $585 per month to cover healthcare premiums, much higher than most states’ unemployment difference.

While passing the largest stimulus bill in American history, Republican lawmakers were faced with a particularly hard decision. Pass the stimulus package even with the harmful unemployment incentives demanded by Democrats, or further delay immediate relief to American families and businesses that was desperately needed. Continuing into the future, Congress must prioritize legislation that will boost the economy rather than hinder its ability to recover.

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