The $2.2 trillion CARES Act passed by Congress last month brought good news for the unemployed workers and small businesses.
For anyone collecting unemployment insurance, the measure provides $600 a week for 16 weeks in addition to the state benefit. For SMBs, the prospect of a loan under the Small Business Administration's Paycheck Protection Program (PPP), which is forgivable if the cash is spent to keep employees working, was the lifeline they’d hoped for.
But there was at least one unintended consequence of the added federal benefit: In many cases, workers made more money staying home.
There is a big range of state benefits. At the bottom end is Mississippi, where the weekly rate is $235. At the other end is Massachusetts, where the top benefit is $823 per week, with up to $397 for dependents for a total of $1,220. When the federal benefit is added in, that's $835 for a Mississippi worker collecting benefits, and as much as $1,820 for a Massachusetts worker.
Sky Marietta and her husband Geoff, opened a coffee shop last year in Harlan, Kentucky. Like many other business owners, they wanted to stay open to offer takeout for many of those on the front lines of the COVID-19 battle. But the couple soon realized, like other SMBs, that their employees could make more money by staying home, per an NRP report. “We basically have this situation where it would be a logical choice for a lot of people to be unemployed,” Sky told NPR.
When the couple first opened and advertised a handful of jobs, 96 people applied to be a barista, Sky wrote on their blog. But within a few months of their grand opening, the pandemic struck and they had limited their service to curbside pickup. The couple reluctantly closed the café in late April to allow their staff to apply for benefits, which would easily exceed the $10-$15 an hour they were being paid.
The maximum unemployment benefit in Kentucky is $415 per week, and for at least four months it totals $1,015 per week with the CARES benefit.