$600 Coronavirus Unemployment Bonus: Set for a Comeback?

 In COVID-19, Australian Capital Territory

On July 1 of this year, Senate Democratic leader Chuck Schumer (D‑NY) and Finance Committee rank­ing member Ron Wyden (D‑OR) intro­duced the American Workforce Rescue Act (AWRA). Their leg­is­la­tion provides unem­ploy­ment ben­e­fit bonus­es rang­ing from zero (in states with unem­ploy­ment under 6 per­cent), up to $600 (in states with unem­ploy­ment above 11 per­cent), and payable “until each state’s economic conditions improve.”

As admin­is­tra­tion and con­gres­sion­al lead­ers con­tin­ue to engage in pro­tract­ed nego­ti­a­tions about what to do next fol­low­ing the expi­ra­tion of the $600-per-week fed­er­al unem­ploy­ment ben­e­fit bonus­es in July, the Senate Democrats’ idea appears to be ancient his­to­ry, includ­ing to the very sen­a­tors who pro­posed it.

The appar­ent reason? Because improv­ing eco­nom­ic con­di­tions around the coun­try are result­ing in shrink­ing unem­ploy­ment ben­e­fit bonus­es under the Schumer plan, which ties the size of such bonus­es to state unem­ploy­ment rates.

When AWRA was intro­duced on July 1, US unem­ploy­ment for May was 13.3 per­cent, the high­est ever record­ed after April’s 14.7 per­cent rate, and the Congressional Budget Office was predicting unem­ploy­ment would spike to 15.8 per­cent in the 2020 summer months. Instead, the strong jobs report released on July 2 showed June unem­ploy­ment fell to 11.1 per­cent. By early August, offi­cial data sug­gest­ed that only 56 percent of states would qual­i­fy for $600 bonus­es under the Schumer plan. On August 6, Senator Schumer effec­tive­ly repu­di­at­ed his own state-based approach, saying “We’re with the 600 [dol­lars]” — mean­ing he sup­port­ed con­tin­u­ing $600 unem­ploy­ment ben­e­fit bonus­es in every state regard­less of the local unem­ploy­ment rate.

Since then, unem­ploy­ment has con­tin­ued to decline sharply, reach­ing 7.9 per­cent nation­al­ly in September, and the number of states eli­gi­ble for $600 bonus­es under the Schumer plan has plum­met­ed. As the chart below dis­plays, if it were enact­ed today only 10 states would qual­i­fy for $600 bonus­es, and 25 states would qual­i­fy for $200 or less (includ­ing four states where bonus­es wouldn’t be payable at all).

Bonuses Payable under the Senate Democratic Proposal, by State

Proposed Bonus States as of August 2, 2020 States as of October 4, 2020
$600 30 (AK, CA, CO, DE, FL, HI, IL, IN, LA, MA, MI, MS, NV, NH, NJ, NY, NC, OH, OK, OR, PA, RI, SC, TN, TX, VT, USVI, WA, WV, WI) 10 (CA, HI, IL, MA, NV, NJ, NY, PA, RI, USVI)  
$500 3 (AL, AZ, KY) 4 (AK, DE, MI, NM)
$400 13 (AR, CT, DC, GA, IA, KS, MD, MN, MO, MT, NM, SD, VA) 7 (CT, FL, OH, OR, TN, WA, WV)
$300 6 (ID, ME, ND, PR, UT, WY) 7 (AZ, CO, DC, IN, LA, MS, PR)
$200 0 16 (AL, AR, IA, KS, ME, MD, MN, MO, NH, NC, SC, TX, VT, VA, WI, WY)
$100 1 (NE) 5 (GA, MT, ND, OK, SD)
No Bonus 0 4 (ID, KY, NE, UT)

Source: Department of Labor. There are 53 “states” in the unem­ploy­ment insur­ance system, includ­ing DC, PR, and USVI.

Three other facts stand out about the Schumer plan.

First, states with the high­est unem­ploy­ment rates, thus get­ting the biggest bonus­es, tend to be blue. As the chart below shows, nine out of 10 states that would cur­rent­ly qual­i­fy for $600 bonus­es have a Democratic governor (the tenth is Republican Charlie Baker in deep-blue Massachusetts). Meanwhile states with the lowest unem­ploy­ment rates, thus qual­i­fy­ing for the small­est bonus­es, tend to be red. Currently, 17 out of 25 states that would qual­i­fy for bonus­es of $200 or less have a Republican gov­er­nor, as do three out of four states in which no bonus­es would be payable at all.

Bonuses Payable under the Senate Democratic Proposal, by Governor’s Party

Sources: Department of Labor. Unemployment rate is three-month seasonally adjusted average total unemployment rate. Governor’s party affiliation here.

Second, reviv­ing $600 bonus­es in all states through March 2021, as pro­posed by House Democrats today, would dis­pro­por­tion­ate­ly ben­e­fit the unem­ployed in red states, com­pared with the lesser pay­ments avail­able in those states under the Schumer plan.

Third, under the Schumer plan, bonus­es would con­tin­ue falling sharply in the months ahead. Bonuses are based on a state’s three-month aver­age unem­ploy­ment rate, which cur­rent­ly includes June, July, and August data. When June (during which US unem­ploy­ment was 11.1 per­cent) drops out and September (7.9 per­cent) state rates are added, bonus pay­ments will fall even more, a pat­tern likely to recur in the fol­low­ing months.

The fact that unem­ploy­ment has been falling sharply in recent months is good news for the mil­lions of unem­ployed American work­ers, as it indi­cates that many are return­ing to work. The unem­ploy­ment ben­e­fit bonus pro­pos­al intro­duced in July by Senator Schumer and Senate Democrats — link­ing con­tin­ued bonus­es to state unem­ploy­ment rates — sug­gests that such progress should lead to reduced unem­ploy­ment bonus­es. But in the face of declin­ing unem­ploy­ment and thus declin­ing bonus­es, that idea has now been reject­ed by its own author. Indeed, Senator Schumer recently reit­er­at­ed his sup­port for “$600 in weekly emer­gency unem­ploy­ment insur­ance” bonus­es in all states, as House Democrats pro­pose. His July state-based bonus leg­is­la­tion, which today would pro­vide far less in most states and no bonus­es in some, went unmen­tioned.

This arti­cle first appeared at the American Enterprise Institute.

Image: Reuters.

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