Americans need employment opportunities, not unemployment incentives

By Rachel GreszlerMay 15, 2020

With more than 1 in 5 Americans filing for unemployment benefits over the past eight weeks, policymakers’ top priority is clear: restoring conditions that allow workers to resume their previous jobs or find new ones.

Federal assistance can help bridge a temporary gap in employment and incomes, but the only long-term solution is to let people get back to work. After all, deficit-financed unemployment checks are no replacement for the valuable goods and services Americans produce.

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Two bills in Congress take a very different approach to helping American workers.

The first, the Getting Americans Back to Work Act introduced by Reps. Ted Budd, R-N.C., and Ken Buck, R-Colo., would fix a highly problematic component of the CARES Act that Congress passed in March. In addition to vastly expanding eligibility for unemployment benefits, CARES added an additional $600 a week on top of usual unemployment benefits. The Budd-Buck legislation would cap total unemployment benefits at 100% of workers’ previous wages.

Full income replacement is still a big increase from the usual 40% to 50% of workers’ wages that typical state unemployment benefit programs replace.

The CARES Act’s additional $600 per week in federal pandemic unemployment benefits is certainly generous — too generous, in fact. It’s caused an overwhelming majority of unemployed Americans to receive far more from unemployment benefits as from their previous paychecks.

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In essence, businesses are having to compete with the federal government’s generous unemployment benefits.

When you consider that someone who usually makes $600 per week is receiving $900 from unemployment insurance, it’s not surprising that they might not want to go back to work.

Another bill, the House Democrats’ HEROES Act (a partisan laundry list that spans more than 1,800 pages), would extend those benefits through the end of next January, including additional extensions through March 31, 2021.

It’s too soon to know how long unemployment will remain highly elevated, but one thing is for sure: Extending already excessive unemployment benefits won’t help. It will increase unemployment and reduce economic output.

My colleague and I at The Heritage Foundation estimated that Congress’ provision of the additional $600 unemployment benefit through July 31 could increase unemployment by up to 13.9 million and reduce output by $955 billion to $1.49 trillion between May and September. An additional six- to nine-month extension would significantly exacerbate lost jobs and economic output.

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It’s one thing to provide short-term and targeted unemployment benefits during forced shutdowns, but providing a year’s worth of unprecedented additional unemployment benefits — up to an extra $31,200 more per worker — would cripple small businesses as they try to get back on their feet.

It’s also incredibly unfair, and wholly un-American, to pay unemployed workers more than the hardworking Americans who continue to work each day.

Policymakers should be focused on helping Americans get safely back to work. Humans are hard-wired to be productive. They will be far better off if policymakers focus on enabling work opportunities — such as removing barriers to working, trading, innovating and investing — than on incentivizing unemployment.

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