Everyone loves the party game/icebreaker “two truths and a lie.”
Can you identify which of the following is NOT true about unemployment insurance benefits/payments?
- All unemployed workers receive unemployment insurance payments.
- Unemployment insurance is not meant to completely replace a person’s income.
- The CARES Act’s $600 additional unemployment benefit creates a disincentive to work.
Let’s take these statements one at a time:
- LIE! Unemployment Insurance (UI) is a joint federal-state program that pays workers who have lost their jobs due to no fault of their own. If you are fired or quit your job, you are ineligible. This program is administered by states and each state may impose its own additional eligibility requirements, benefit amounts, and length of time benefits can be paid. Employers fund UI through premiums they must pay on behalf of workers.
- TRUTH! If a worker’s entire pay is entirely replaced by UI benefits, that worker may stay out of the workforce rather than look for new employment. Therefore, benefits are based on a percentage of a worker’s earnings, and each state determines a maximum amount that a worker can get. On average, UI replaces about half of workers’ wages.
- TRUTH! The CARES Act of 2020 granted an additional $600 weekly benefit to all workers. Such a generous benefit boosted total income for low-wage workers beyond what they would earn if they went back to work. Analysis by the Foundation for Government Accountability (FGA) finds that a significant portion (68 percent) of workers are being paid more on unemployment than they were earning previously. One in five workers were earning double their prior wages.
Unemployment benefits are meant to be a temporary cushion for American workers who have lost their incomes, not a lifestyle. In response to the coronavirus pandemic, Washington increased and extended UI benefits to help people who could not or were fearful to return to work. Before extending more aid to unemployed workers, Congress should right-size benefits to make work rewarding.