Republicans and Democrats in the United States Congress are still haggling over the next round of virus relief aid.
A key sticking point involves the federal weekly top-up to state unemployment benefits that expired last week.
How far apart are Republicans and Democrats? And what is at stake for the tens of millions of US workers who are collecting jobless benefits, not to mention the nation’s economic recovery?
How far apart are the Republican and Democratic plans?
About $2 trillion. Senate Republicans last week unveiled a $1 trillion package. Democrats in the House of Representatives are pushing for a $3 trillion plan.
So why are unemployment benefits such a sticking point?
The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March included a $600 federal weekly top-up to state unemployment benefits. The goal was to fully replace lost wages for average workers – tens of millions of whom were made jobless as lockdowns swept the nation.
Democrats want to continue that $600 federal weekly top-up through January of next year.
Republicans want to extend it as well, but at a dramatically reduced rate. They want to slash the federal top-up from $600 a week to $200 a week through September. After that, states would bring the combined state and federal payment to 70 percent of prior wages with the top-up capped at $500 a week.
How much would these plans cost?
Continuing the $600 federal top-up through January would cost roughly $437bn.
Economists at Goldman Sachs reckon the Republican plan would cost around $100bn – or roughly $300bn less than the Democratic plan.
Why do Republicans want to cut back unemployment aid?
Some Republicans are concerned that the $600 federal weekly top-up could deter people from returning to work, because some low-wage workers were making more collecting those federally enhanced unemployment benefits than they were before they were laid off.
A May study by researchers at the University of Chicago concluded that 68 percent of unemployed workers were eligible for enhanced jobless benefits that exceeded their lost earnings, while one in five of those eligible could see their incomes double with federally enhanced jobless benefits.
Is there any evidence that the extra $600 dissuades people from working?
A study (PDF) by researchers at Yale University involving so-called “high-frequency” data found that “workers who experienced larger increases in UI (unemployment insurance) generosity did not experience larger declines in employment when the benefits expansion went into effect.”
Put simply, the Yale economists found that the top-up does not deter people from returning to work.
So why do Democrats want to continue the $600 federal weekly top-up?
Democrats want to see the benefit phased out only as state labour markets start to recover.
What do economists say about slashing the $600 federal top-up?
Some economists are warning that cutting the benefit could harm the US economic recovery because a drop in income could lead to a drop in consumer spending, which accounts for some two-thirds of US economic growth.
Economists at the progressive-leaning Economic Policy Institute believe that cutting the federal weekly top-up from $600 to $200 could harm economic growth and lead to 3.4 million fewer jobs being created during the next year.
How is the US jobs market looking lately?
There are definitely signs of trouble brewing in the nation’s jobs market as states and cities halt or roll back the lifting of coronavirus lockdown restrictions.
After nearly four months of steady declines, the number of people filing claims for state unemployment benefits has trended higher for two consecutive weeks – signalling that layoffs are on the rise.