The increase in unemployment benefits included in the $ 1.9 trillion pandemic relief package signed on Thursday by President Biden could keep billions of dollars a week in stimulus flowing into the economy over the summer.
The plan extends two pandemic-related programs and increases supplementary payments of $ 300 for all dismissed workers who receive unemployment insurance until early September – well after the likely disappearance of the $ 1,400 checks for individuals. About 20 million people took advantage of unemployment insurance in mid-February, up from 2 million the previous year, adding up to more than $ 10 billion in additional stimulus a week.
Some economists say that extending extra unemployment benefits for almost 18 months is a disincentive for some to return to work, preventing sectors such as logistics, construction and certain retailers from finding employees as the economy recovers.
Other economists say the payments have given impetus to many low-income families, who lost jobs disproportionately in the coronavirus pandemic, while in turn pushing money back into the economy as a whole. The United States had 9.5 million fewer jobs in February than in the previous year, according to the Department of Labor.
“Things are looking up, but we still have a huge job gap,” said Heidi Shierholz, Ph.D. economist at the Institute for Economic Policy who served in the Obama administration. “Unemployment benefits will help some people get through what can still be very difficult in the coming months,” she said.
The law allows unemployed workers, including self-employed workers and others who are normally not entitled to any benefits, to take advantage of unemployment assistance until September 6. With the weekly increase of $ 300, the average weekly unemployment benefit for those who qualify through regular state programs is around $ 620 per week, according to the Department of Labor, roughly the equivalent of working on time full at $ 15.50 an hour.
A person who received the average level of benefits since March last year would have received about $ 30,000 last year. The extension may allow the individual to receive about $ 15,000 more.
Economists hope that the economic stimulus and a slowdown pandemic will drive economic growth to close to 6%, which would be the fastest pace in almost 40 years. However, extra government spending over the past year has triggered a surge in federal deficits and the risk of fueling inflation.
At the end of January, there were 6.9 million unfilled jobs in the United States, the Labor Department said on Thursday, just under a year earlier, just before the pandemic broke out. But there are more jobs available in some fields.
The job search site Even.com said there were almost 40% more manufacturing and warehouse vacancies at the end of February, compared to the previous year. The openings of pharmacies and construction rose more than 30%.
President Biden sanctioned Covid-19’s $ 1.9 trillion aid project, providing Americans with an economic boost. Gerald F. Seib of the WSJ details what is in the bill and why it is significant to the Biden government. Photo illustration: Laura Kammermann
The extended benefits create an impediment to hiring employers in these industries, said Marianne Wanamaker, Ph.D., labor economist at the University of Tennessee, who served in the Trump administration.
“By giving people an easy way out, you are decreasing your ability to return to the workforce,” she said. “And we know that the longer people don’t work, the more they struggle to get back.”
The unemployed for a year or more can see skills atrophy and face the stigma surrounding a long gap of unemployment in their CVs. They also make life adjustments, such as living with relatives, which can cause them to leave the workforce, said Wanamaker. “A mismatch between labor supply and demand is a recipe for higher inflation and slower economic growth,” she said.
Recent Labor Department guidelines make it possible for some workers to refuse job offers and continue to receive benefits if they believe the workplace is not safe. Normally, dismissed workers must be actively looking for a job to receive unemployment insurance. Some people have not restarted their job search because their children’s schools have not been fully reopened or because they are concerned about falling ill.
Dr. Shierholz said that most people would opt for a permanent job instead of remaining on temporary unemployment benefits that are expected to end in September. “And if people take a little longer to find a job, it can be good for them and for the economy,” she said. “They can find a job that matches their skills and interests, where they can be more productive and likely to be paid more.”
Some employers say the $ 300 increase provided this year is more manageable than the extra $ 600 in weekly payments included in the initial government aid package approved by Congress and signed by former President Donald Trump last year. These payments ended in July 2020.
A handful of workers at Hoffman Car Wash stores in Albany, NY, asked not to be revoked last spring because their unemployment benefits paid more than they earned from cleaning cars, said owner Tom Hoffman Jr. But he said that the $ 300 increase did not cause the same problem and it recently managed to find the workers it needed.
He said his business remains low compared to 2019, because people drive less and some customers are reluctant to have the interior of their vehicles clean, the service more laborious.
“I think the $ 300 is useful for people who are unemployed,” he said. “This is hardly a disincentive to the $ 600 we saw last year.”
Write to Eric Morath at [email protected]
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