ISSN 2330-717X

The Unemployment Insurance System Is Badly Broken – OpEd

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The Republicans have been working hard to ensure that the $600 weekly supplement to unemployment insurance benefits, which was put in place as part of the pandemic rescue package, is not extended beyond the current July 31 cutoff. They argue that we need people to return to work.

They do have a point. The supplement is equivalent to pay of $15 an hour for someone working a 40-hour week, and this is in addition to a regular benefit that is typically equal to 40 to 50 percent of workers’ pay. The supplement translates into an even larger hourly pay rate for workers putting in shorter workweeks, which was the case for most laid off workers in the restaurant and retail sectors.

It is hard for employers in traditionally low paying sectors to match these pay rates.  Even those of us who are big proponents of higher minimum wages would not advocate a jump to more than $20 an hour at a point when businesses are crippled by the pandemic.

However, there is also the point that we don’t want workers to have to expose themselves to the coronavirus. That was the reason for the generous supplement. We wanted to make sure that workers, who in many cases were legally prevented from working, did not suffer as a result.

There is an obvious solution here. Suppose we reduce or end the supplement in areas where the pandemic is under control.

This would not be determined by some Trumpian declaration that the pandemic is over, but by solid data. The obvious metric would be positive test rates. Suppose that the supplement was reduced or eliminated in states or counties where the positive test rate is less than 5 percent. (This may not be the right rate.) This would mean that workers going back to work would face relatively little risk of contracting the virus. It would also give states the incentive to conduct vigorous testing programs, as well as other control measures, in order to get their positive rates down.

Our unemployment insurance system is badly broken and it would be desirable to have more generous benefits, and also to focus more on work-sharing, as other countries have done. We can recognize this point and still agree that an arbitrary supplement to all benefits is not the right long-term fix even if it was a very good policy in the pandemic.

This article first appeared on Dean Baker’s Beat the Press blog.

Dean Baker

Dean Baker

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

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