Unemployment Claims Just Spiked 1,000%. How Democrats’ Approach Will Make It Worse.

Originally published on this site

Unemployment claims spiked more than 1,000% last week, with initial claims rising from 282,000 to 3.3 million as businesses laid off workers during the coronavirus pandemic.

This marks the highest level of
seasonally adjusted initial unemployment claims since the series of reports began
over 50 years ago.

Labor Secretary Eugene Scalia noted: “This large increase in unemployment claims was not unexpected, and results from the recognition by Americans across the country that we have had to temporarily halt certain activities in order to defeat the coronavirus.”

But it’s nonetheless worrisome.

What’s more troubling, however, is
Democrats’ insistence on including a provision in the CARES Act that will increase
unemployment insurance claims.

The CARE Act creates “Federal Pandemic
Unemployment Compensation” to provide unemployed workers with an additional
$600 per week in unemployment insurance benefits.

These amped-up benefits are available regardless
of how much workers were earning prior to becoming unemployed, and regardless
of whether their unemployment has anything to do with COVID-19. Even workers
who became unemployed before March can receive additional benefits.

Combined with traditional unemployment
benefits that average about 50% of workers’ previous wages, this will mean that
a majority of Americans can get more money when unemployed than when employed.

Consider someone who makes $1,000 per
week ($52,000 per year). They now can receive 10% more—$1,100 per week—if they
become unemployed.

Lower-wage workers will have the greatest
financial incentive to collect unemployment insurance. Someone who works 30
hours per week at the federal minimum wage could triple their weekly income—from
$218 per week to $709—by collecting unemployment insurance instead of working.

With millions of workers losing their
jobs through no fault of their own, it makes sense to provide temporary federal
unemployment insurance supplements to bring individuals up to 100% of their
previous incomes.

Maintaining full incomes would help
individuals most negatively affected by the pandemic and could reduce the
breadth and depth of the economic downturn.

But Democrats refused to do just that,
unanimously rejecting Republicans’ amendment to cap total unemployment
insurance benefits at 100% of workers’ wages.

The windfall unemployment insurance
benefits that millions of workers will receive might seem like great news. But
in reality, supersized unemployment insurance checks that discourage Americans from
working likely will impede the economic recovery. They could also have
substantial long-term consequences for those induced into unemployment.

Economic studies show that even
short-term unemployment can lead to a decline in physical and mental health and reduced fertility.

The real tragedy will come if the added
unemployment benefits cause an increase in long-term unemployment. Such
joblessness has been shown to reduce
workers’ incomes and opportunities
and to
cause a rise in disability insurance beneficiaries.

Humans have an innate desire to work, to
produce things of value. Public policy should support instead of
discourage work.   

Other components of the CARES Act package
recognize the importance of keeping people employed, even if their employment
is temporarily shut down.

For example, the CARES Act provides funds
(through loans and then loan forgiveness) to cover up to 2.5 months of payroll
costs for small businesses. Employers also can receive advance credits for up
to 10 weeks of paid sick and family leave that they are required to give their
workers (including leave for employees who have children home because of school
and child care closures).

And for larger businesses, loans are
contingent on their maintaining at least 90% of their previous employment
levels.

But if employees can be made better off
by being laid off, and businesses don’t need their employees and can avoid
taking out loans, that’s what they’ll do.

That could turn a temporary public health
crisis into a massive economic downturn, not to mention negating some of the
potential benefits of an additional $2 trillion in deficit-financed stimulus
spending.

If Congress wants the economy to recover
as quickly as possible after it’s safe to reopen things, and if they care about
the long-term welfare of workers, they should enact policies that will keep
people employed instead of incentivizing them to become unemployed.

The post Unemployment Claims Just Spiked 1,000%. How Democrats’ Approach Will Make It Worse. appeared first on The Daily Signal.

Originally posted at https://www.dailysignal.com/2020/03/26/unemployment-claims-just-spiked-1000-how-democrats-approach-will-make-it-worse/?utm_source=rss&utm_medium=rss&utm_campaign=unemployment-claims-just-spiked-1000-how-democrats-approach-will-make-it-worse.

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