Unemployment benefits provide people who lose jobs with a little help for a little while. The money is not really enough to live on, by design: People are supposed to find a new job.
During an economic crisis, however, people can’t find jobs. They need money to live on.
Congress recognized this reality in March when it responded to the arrival of the coronavirus pandemic by increasing unemployment benefits. But the expansion expires at the end of this month, even as the pandemic continues to rage. Congress, after dragging its feet for months, has all but run out of time to prevent a lapse in the distribution of extra aid.
The nation’s elected representatives need to act immediately to extend emergency benefits, and to authorize the extra aid to continue for the duration of the crisis.
Because crises are both inevitable and unpredictable — and because the federal government is slow to react whenever a crisis begins to unfold — the government also needs a set of rules that automatically switches the unemployment benefits program from normal mode to crisis mode, and back again, based on the evolution of economic conditions.
The need for more unemployment benefits is just part of a broader set of measures Congress must take to shore up the economy. State and local governments urgently need help, including funding for schools. So do businesses that the pandemic has shuttered, and health care providers it has overwhelmed.
But those who have lost jobs are singularly vulnerable — especially because pandemic job losses have been concentrated among low-wage workers with little money in the bank.
The program created in March has two main components. First, Congress expanded eligibility for unemployment benefits to include self-employed workers, gig workers and others who were previously ineligible. Americans deserve to have that adjustment made permanent: It moves the safety net of unemployment benefits more squarely beneath the modern work force. As of the end of June, more than 14 million American workers had qualified for benefits under the expansion out of a total of 33 million workers drawing unemployment benefits.
The second component of the rescue package gave unemployed workers a $600 weekly payment from the federal government on top of their standard unemployment check, which averages $373 a week, although the amount varies widely by state. The average recipient is thus getting nearly $1,000 a week. People also can collect the benefits for up to 39 weeks, up from as little as 13 weeks before the crisis.
Federal aid, including the expansion of unemployment benefits, has helped to stabilize the finances, and thus the lives, of millions of American households and the communities of which they are a part. It’s not as good as a job: Among other things, millions of people have lost their health insurance. But even as the pandemic has pushed unemployment to the highest levels since the Great Depression, research suggests the aid is preventing any meaningful increase in the share of families living in poverty.
These are individual benefits with societal impact. Workers on federal aid can afford to make rent payments, easing the pressure on landlords. They can afford to shop at local stores, supporting hard-pressed small businesses.
When Congress slapped a July expiration date on the program, there was reason to hope that the United States might have brought the pandemic under control by now. Other nations have done so. But the United States has failed to control the spread of the virus, and fear continues to curtail economic activity. The need for continued aid is undeniable.
The House of Representatives passed a bill in May that would extend the aid program through January, but few economic analysts expect the economy to recover by then — particularly as the first wave of the coronavirus continues to spread rapidly across the Sun Belt. While any arbitrary deadline risks another battle over reauthorization, a January deadline would be particularly fraught. After the Republican Party lost control of the White House in 2009, during the last economic crisis, congressional Republicans decided it was politically expedient to oppose federal spending that was needed to revive the economy. Democrats would be wise to take the lesson.
The size of the $600 bonus is also a subject of controversy. The figure was chosen because lawmakers wanted to provide workers with the money they would have earned, but the antediluvian conditions in many state unemployment offices made it impossible to tailor benefits. Instead, Congress picked a figure that would make the average worker whole.
The White House, and some congressional Republicans, are upset that some workers are getting more money than they earned in their former jobs. They argue this could discourage workers from seeking new jobs.
This is not an immediate problem: At the moment, the United States is suffering a lack of jobs, not a lack of willing workers. Moreover, there is a ready solution: a plan to reduce the payments as the economy recovers.
Senator Chuck Schumer, Democrat of New York, and Senator Ron Wyden, Democrat of Oregon, introduced legislation early this month to continue the emergency aid on a state-by-state basis until the jobless rates in each state recede. Expanded eligibility would last until unemployment dropped to 5.5 percent. Expanded benefits would drop by $100 when the rate fell below 11 percent, and by another $100 each time the rate dropped by another percentage point, ending when the rate hit 6 percent.
Congress can avoid the need for similarly ad hoc policymaking during future crises by providing funding for states to fix the problems that have impeded the distribution of benefits — and by adopting rules to automatically expand and contract supplemental benefits.
Claudia Sahm, then a Federal Reserve economist, wrote in a paper published last year that the movement of the unemployment rate could be used as a reliable indicator. She found that since the 1970s, when a three-month average of the unemployment rate rose half a percentage point above the lowest rate during the previous year, the economy was in a recession.
Ms. Sahm, now the director of macroeconomic policy at the Washington Center for Equitable Growth, has proposed using this “Sahm rule” as a trigger to initiate aid programs such as supplemental unemployment benefits. The emergency aid would then continue until the unemployment rate fell back to that threshold. In the current crisis, emergency aid would continue until the unemployment rate, now 11.1 percent, receded to 5.3 percent.
That would be a smarter way to provide workers with necessary and timely aid.