Unemployment recipients might not be ‘overpaid’ after all
August 5, 2020 Huffington Post
One of the top talking points in the Capitol Hill debate over unemployment benefits might be wrong.
Most unemployment claimants are probably earning less on unemployment than they did at their previous jobs, according to a new data analysis by the liberal advocacy group Groundwork Collaborative and the National Employment Law Project.
A previous study by University of Chicago economists found that more than two-thirds of unemployment claimants received more in benefits than they did from work, thanks to an extra $600 weekly payment Congress created in March to help people who lost jobs because of the coronavirus pandemic.
The extra $600 expired last week, and lawmakers are at an impasse over whether to replace the supplemental payments, which topped off workers’ ongoing state-funded jobless pay.
Republicans think $600 is too much, and they have repeatedly cited the University of Chicago study.
“According to studies that have been done, including by the University of Chicago, about 68% of the people on unemployment insurance are making more money on unemployment insurance than they were making at work,” Sen. Rob Portman (R-Ohio) said Tuesday on the Senate floor.
Treasury Secretary Steve Mnuchin, one of the lead Republican negotiators on the next big pandemic relief bill, also cited the University of Chicago study on Sunday in an interview in which he lamented that jobless claimants are “overpaid.”
There’s no question that some percentage of laid-off workers received more in unemployment than from work. The Chicago study’s findings have been echoed by the Congressional Budget Office and a great many anecdotes from employers and employees themselves.
The new paper, by Groundwork Collaborative’s Marokey Sawo and the National Employment Law Project’s Michele Evermore, similarly compares unemployment payments with what workers likely earned in their previous jobs, according to industry-level wage compensation data. The big difference, however, is that the new paper includes non-wage benefits in its comparison, which amounted to 28% of unemployment claimants’ total work compensation on average.
“Our inclusion of non-wage compensation is driven by our concern that measures of wage compensation do not paint a complete picture of all that workers lose when they are laid off,” Sawo and Evermore write. “Many workers lose more than just wages in unemployment ― they lose employer contributions to health insurance, paid leave, and retirement benefits as well.”
By their reckoning, 60% of unemployment claimants worked in industries where average total compensation exceeded what the former employees could receive in unemployment benefits.
“These individuals are likely receiving less, not more, in unemployment than they were in their former jobs, even after accounting for the $600 per week
benefits boost,” the paper says.
Jobless pay surpassed wages for the other 40% of workers partly because they had previously worked part time. The extra $600 applied to everyone who received a benefit, even if it was a partial one for a part-time job.
Both papers extrapolated from economic datasets that did not contain up-to-the-minute information on the actual people receiving jobless benefits over the past few months. The Chicago study’s authors acknowledged that they ignored non-wage compensation in their findings, and that including such benefits would reduce the percentage of wages replaced by unemployment compensation.
Joseph Vavra, one of the co-authors of the University of Chicago study, said they’ve been updating their research to account for non-wage benefits and that the results haven’t changed their conclusion.
Vavra said in an email that the “key difference” between their paper and the Groundwork Collaborative paper is that “we account for the individual level distribution of earnings and benefits while their analysis focuses on industry averages.”
Either way, there’s no doubt some workers got more from unemployment. It was not a surprise that they did.
Democrats originally wanted to supplement state benefits so that total jobless pay would replace 100% of workers’ previous wages. They went with a flat sum instead because state workforce agencies, which actually pay the benefits, couldn’t quickly handle the calculation. They settled on $600 because it’s roughly the difference between the average unemployment benefit and the average wage, though benefit amounts vary from state to state.
The extra $600 was an unprecedented increase to weekly jobless pay, with Democrats and Republicans alike acknowledging that workers are blameless for job losses caused by the pandemic.
But Republicans have consistently complained that higher jobless pay will wreck the economic recovery by discouraging people from returning to work. Economists who’ve looked at job growth since March, however, haven’t noticed.
The benefits stopped last week as Republicans insist on a lower number, while Democratic negotiators say they’re holding out for the full $600. Both sides have said they want a deal within the next two weeks.