Market Overview

The Philosophical Debate Over Federal Unemployment Benefits

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The Philosophical Debate Over Federal Unemployment Benefits
  • On July 31, additional federal unemployment insurance came to an end, affecting the finances of millions of Americans
  • Despite what some skeptics assume, there is little evidence that increased unemployment insurance discourages people from working. 
  • Congress has yet to decide whether unemployment insurance will be extended.

On March 27, the United States authorized $2.2 trillion in emergency spending as a part of the comprehensive CARES Act. One of the key components of this act boosted unemployment insurance, enabling many Americans to receive $600 per week in additional benefits. 

Following the COVID-19 outbreak, unemployment rates skyrocketed to 14.7%. As of Friday, the added unemployment insurance has expired. Combined with rent and mortgage payments being due Aug. 1, many unemployed Americans are now facing unprecedented financial challenges.

Some in Congress have suggested extending these benefits, either at 70% of the worker’s original income or as new payments.

The Pushback Against Added Federal Benefits: Opponents of a renewed unemployment insurance claim that this insurance is not only costly but discourages some people from going back to work. The insurance provides roughly the untaxed equivalent of earning $15 per hour at 40 hours per week.

With the federal minimum wage being $7.25, some skeptics in Washington observe that some people might stand to earn more by not working.

“Those fears are unfounded,” according to a statement made by the Joint Economic Committee.

“The best evidence suggests that during this current economic downturn both the unemployment rate and duration of unemployment were minimally impacted by unemployment insurance benefits and the extension of benefits.”

What's Next: Work benefits, opportunity for advancement and financial security are just a few of the reasons American workers likely still feel the need to work.

This week, lawmakers will continue debating whether unemployment benefits should be extended, with some Republican legislators proposing a modest $200 per week while Democrats have generally been calling for more generous payments.

 

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