America’s governors should fix unemployment insurance

On Friday, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act or CARES Act. This $2.2 trillion stimulus package will provide economic aid to health care professionals, working class families, small businesses, and the unemployed during this epidemic.

Unfortunately, some provisions in this law threaten America’s workforce and eventual economic recovery. Specifically, the law adds an additional $600 per week on top of the existing unemployment insurance benefits all laid-off workers will receive for the next four months. These funds will be administered regardless of how much money the individual was earning before the crisis, and regardless of whether their unemployment is related to COVID-19 disruptions.

Instead of supporting workers, this creates a situation in which many employees are better off being fired than remaining employed during this pandemic-created economic downturn.

To put the scale of the problem in perspective, the median weekly wage for full-time workers is $936. The average unemployment benefit across the country is $385, which means the average new benefit should be at least $985 — higher than the median wage. That means most workers would actually get a raise by leaving the workforce.

Of course, workers ordinarily can’t quit and receive unemployment insurance. But the new law expands unemployment eligibility and says workers can access this additional money for many reasons associated with COVID-19 even though they may still have a job or job offer. It’s up to states to make that call, and it could be interpreted to allow many employees to quit their current job and claim benefits.

In addition, the provision misplaces incentives, leading to businesses which might be experiencing a downturn in revenue being encouraged to lay workers off instead of showing American grit. Take restaurant owner Daniel DeLeon of Orange Park, Fla. DeLeon is donating his salary in order to keep his employees on payroll. Sacrifices like this will help the economy quickly get back to normal after the crisis. But with the new measure in the CARES Act, employers are actually incentivized to lay off their employees because they would actually get a raise. On a mass scale, that would turn a short public health challenge into a long economic crisis.

Layoffs are inevitable in a downturn, which is why we have unemployment insurance. But the new, excessive rate of unemployment insurance would discourage workers from rejoining the workforce. If someone is laid off this week, they may not start looking for a job until August — or even longer. Why take a pay cut to work more hours?

While normal unemployment benefits are around half of workers’ pay, in a time of crisis it may make sense to raise that amount. That’s why several Republican senators, led by Sens. Ben Sasse of Nebraska, introduced an amendment last week to do just that: ensure payments don’t exceed100 percent. But the left decided to oppose the common-sense amendment, and it never made it into the CARES Act.

But there is still time to mitigate the damage from this provision. That’s why our organizations, Heritage Action and Club for Growth, are calling on all governors to work closely with Secretary of Labor Eugene Scalia to limit the long-term damage to both workers and small business owners. We are also calling on governors to crack down on waste, fraud, and abuse in state unemployment offices. Unemployment insurance already has one of the highest overpayment rates among federal programs — now isn’t the time to encourage more waste.

Governors can also work to help employees stay connected with employers. Whether that’s providing assistance to businesses who keep employees on payroll or increasing access to small business loans, as governors like Ron DeSantis of Florida are already doing, they can keep the ranks of the unemployed from skyrocketing further than they already have.

Our nation is facing a great challenge. COVID-19 is a public health crisis — now our governors find themselves on the front lines fighting to keep the crisis from getting worse.

Jessica Anderson is vice president of Heritage Action for America. David McIntosh is president of Club for Growth.