According to a recent National Bureau of Economic Research (NBER) survey, two-thirds of unemployed workers in the U.S. after the CARES Act could have received compensation that was better than what they earned at their previous jobs, with one-fifth also receiving almost double what they used to earn.
The benefits of the CARES Act, passed in March, included $600 additional payments to unemployment benefits to help offset the massive job losses and risks due to the coronavirus.
But due to the discrepancy between the new boosted unemployment earnings and the recipients’ old wages, the study concluded that “the CARES Act actually provides income expansion rather than replacement for most unemployed workers.”
The study also looked at the differences between various types of positions either laid off or still going during the pandemic. Laid-off retail workers, for example, can make 142 percent of what they used to earn on the new Unemployment Insurance (UI) benefits, while grocery workers still employed didn’t receive any such benefits from the same system.
To help remedy the situation, the study recommended implementing some type of legislation to “provide income replacement while limiting income expansion,” perhaps by adding a fixed amount to states’ replacement rates, rather than to their UI benefits.
The study recommended implementing new rates which would be able to provide just enough over a person’s usual wages to help them through the pandemic, without creating new inequalities that disproportionately leave behind those still employed through the pandemic.
The study posits that the simple fixed UI rates, providing so much more than many workers used to earn, disincentivized those workers from seeking work at companies like Amazon which needed more employees during the worst parts of the lockdown.
“Paying very high UI benefits to low-income households helps provide support for these vulnerable households, but it can also deter this type of beneficial labor reallocation,” the study stated.
Another potential policy is giving incentives to the unemployed to return to work instead of remaining on unemployment benefits.