Eakinomics: Helping
and Over-Helping People in Response to COVID-19
The Families First Act and the Coronavirus
Aid, Relief, and Economic Security Act provided enormous
support for workers and families through checks of up to $1,200 per person,
paid leave, enhanced unemployment insurance, increased nutrition
assistance, free testing, retirement account flexibilities, forbearance on
mortgage payments and eviction protection, and student loan forgiveness and
delayed payments. These are summarized here and explained in this report by an AAF cast of
thousands.
These programs will provide invaluable resources as families weather the
economic fallout of the COVID-19 pandemic. They were enacted remarkably
quickly and funded incredibly generously by Congress.
In some cases, however, too generously.
Among the key provisions in the enhanced unemployment insurance (UI)
benefits is a $600 per week federal supplement to the state unemployment insurance
benefit. That is, workers will receive the normal unemployment benefit (for
up to 39 weeks) plus an additional benefit of $600 in cash. That’s an
extraordinarily rich set of benefits. The average state unemployment
insurance benefit is $385, so the total exceeds the median weekly wage of
roughly $900.
That’s not a great incentive to work. Employers have figured this out as well and can
more easily lay off workers knowing that the economic blow will be
considerably less that otherwise. In short, both sides of the hiring
equation have incentives to put workers on UI. This is a bad idea.
The good news is that the $600 bonus expires July 31. Since it is unlikely
in the extreme that the economy will be fully recovered by then, these poor
labor market incentives will not have much of a chance to inflict harm on
the recovery.
There is a danger, however. Washington is notorious as the graveyard for
good ideas and a fertile environment for the opposite, so there will be
pressure on Congress to extend the federal benefit. Under no circumstances
should this be permitted to happen.
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