Two-Thirds of Jobless Workers Make More in Unemployment Than They Did at Work

More than two-thirds of Americans who are unemployed as a result of the coronavirus pandemic receive more money now through expanded unemployment benefits than they do through their ordinary wages, researchers at University of Chicago's Becker Friedman Institute (BFI) discovered.

According to a working paper published by a BFI research team last month, 68 percent of unemployed Americans who qualify for the expansion of unemployment benefits included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March receive more now than they do in their typical income. The act, which President Trump signed into law, enabled all qualifying workers to receive $600 every week on top of the unemployment benefits they get through their state.

Though the expanded unemployment benefits have affected workers' finances in different ways depending on their income levels, one of the paper's co-authors said the expanded benefits was and continues to be necessary as the U.S. observes its highest unemployment levels since World War II.

"The fact that unemployment is so high is an important reason why you want to have a high level of unemployment insurance benefits," Peter Ganong, an assistant professor at the University of Chicago's Harris School of Public Policy, told Newsweek. "I think it's very important that we continue some kind of extension of the benefit supplements," he added, though he said future benefit supplements would ideally be structured differently.

Dollar bills
New research suggests a blanket fixed-dollar supplement to unemployment insurance benefits is not the best approach for the next economic relief package. Justin Sullivan/Getty

In addition to the data researchers gathered about workers who bring in more than their usual income through the CARES Act benefit expansion, they found that about one in five unemployed Americans earn double or more than their traditional wages through the measure. Ganong said it was important for Congress to implement the broad $600-per-week supplement as the economy was unraveling in March, but he said there were better ways for legislators to proceed while still prioritizing worker aid.

"The challenge with any fixed supplement is that you're going to both get it too high for some people and possibly too low for other people," Ganong said.

Rather than reduce the fixed-dollar bonus for unemployed Americans, the paper recommended changing it to a fixed proportional supplemental rate, which researchers said would still give some workers benefits that exceed their wages but would not do so excessively. Instead of a blanket $300 given to unemployed workers on top of their benefits each week, for example, the paper suggested giving each worker a bonus calculated based on a fixed percentage of their income.

"A Supplemental Replacement Rate policy which provides a proportional benefit instead of a fixed dollar benefit is also simple and should be administratively feasible," the paper said.

Debate over how to design a second economic relief package has been going on for months as congressional legislators weighed the damage of the pandemic to American workers with the risks from adding more to the national debt. Some Republicans have voiced concern in recent weeks that the unemployment benefit expansion incentivizes workers to remain jobless instead of returning to work at a time when many are eager to get the economy back on its feet.

Last month, Ohio Senator Rob Portman cited the BFI team's research in his proposal to introduce return-to-work benefits in place of extending the current $600 supplements. Ganong said his team has discussed its findings with legislators on both sides of the aisle as lawmakers decide on the best path forward.

Regardless of how and when a second relief bill is passed, Ganong said it would be necessary to continue some version of an expansion of traditional unemployment benefits as Americans continue to struggle because of pandemic-induced shutdowns.

"I think it's vitally important to extend unemployment insurance benefit supplements, and I think there's a better way to do it for the next phase," he said.