Unless Congress acts, the $600 per week boost to unemployment benefits will be cut off at a time when a record number of Americans depend on that assistance.
The $600 weekly payments from the Federal Pandemic Unemployment Compensation program were put in place as part of the $2.2 trillion CARES Act that Congress passed in late March amid the coronavirus pandemic. Americans who are eligible for unemployment insurance receive an extra $600 on top of what they normally claim under their state's benefits. Yet this boost is scheduled to end for all states except New York, on Saturday July 25, 2020. New York's end date is Sunday, July 26, according to the Department of Labor.
Roughly 25.6 million workers are set to be impacted by this benefit loss, according to recent estimates by the progressive think tank The Century Foundation. That includes 15.6 million Americans enrolled in regular state unemployment programs who currently receive the extra $600 boost and about 9 million people on the Pandemic Unemployment Assistance program, which specifically covers business owners, self-employed Americans, gig workers and independent contractors who are not typically eligible for unemployment. Approximately 1 million Americans receiving benefits through the Pandemic Emergency Unemployment Compensation also get the $600 boost. While the $600 unemployment boost program is set to end this month, the PUA and PEUC programs will run until the end of 2020.
The economic impact of the extra benefits adds up to $15.4 billion per week nationwide, up from states spending less than $1 billion per week on unemployment before the crisis, the Century Foundation reports.
"Working families from all over the country, including more than 1 million who signed one petition, have made clear that these extra UI funds have made the difference in helping families pay their medical bills, care for their children and keep a roof over their head as they await the opportunity to return to work safely," says Andrew Stettner, a senior fellow at the Century Foundation and a leading unemployment expert.
What happens once the $600 boost ends
Once the extra $600 payments end, unemployed Americans will be left with whatever unemployment compensation their state typically pays out — that amount varies dramatically by state. The Century Foundation estimates workers are set to lose between 50% and 85% of their benefits once the $600 boost is cut off, depending on what state they live in.
In terms of dollars, the Brookings Institution estimates that the national average weekly payment was $387 prior to the coronavirus pandemic. Mississippi, for example, paid an average of $215 per week, while unemployment benefits max out in Arizona at $240 a week, which is second lowest in the nation. Meanwhile those in Massachusetts received $550 per week, on average.
"It's going to be a real shock to people, especially in states like Arizona, where the maximum benefit is $240 a week," says Michele Evermore, senior policy analyst for the National Employment Law Project. "I doubt anybody can afford rent in Phoenix on that much."
Women, Blacks and Latino Americans are likely to be most impacted by the reduction of these benefits, Stettner says. "There are clear racial justice implications of the...cutoff and the return to meager state unemployment benefits, as those states with the highest reported share of Black recipients also have the lowest benefit amounts," Stettner writes.
In June, the Congressional Budget Office estimated that up to 42% of those receiving unemployment benefits were non-white. And in most states, the majority of unemployment benefit recipients are women, according to the Century Foundation's research.
While Democrats have pushed for extending the benefits, some Republicans have questioned whether the $600 boost is deterring Americans from returning to work. Typically, unemployment benefits replace about 45% of a worker's pay, but with the boost, some workers may earn more money while unemployed than by returning to their jobs. Some policymakers have introduced alternatives to extending the $600 benefit, including paying workers a "bonus" when they return to work.
It's not just those who are unemployed who will be affected when the $600 boost is cut off. "I think most people think that when the $600 gets cut off that if they're not unemployed, it's not going to affect them. But when 30 million people are no longer getting $600 extra dollars, that's going to have a multiplier effect on the whole economy," Evermore says.
In fact, in a recent Congressional testimony, economist Jason Furman estimated that the extra $600 unemployment benefit will boost GDP by 2.8% and support just under 3 million jobs.
"Letting this extra $600 in unemployment insurance benefit expire at the end of July would by itself cause more job loss than was seen in either of the recessions of the early 1990s or early 2000s," writes Josh Bivens, director of research for the Economic Policy Institute.