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dir="ltr">A federal unemployment supplement to what states offer has become the latest political football.
With President Donald Trump’s executively-ordered $300 in weekly benefits soon to expire and Congress at loggerheads over a new aid package, one of the arguments against additional aid persists that paying someone nearly as much, if not more, than their former salary was an incentive not to return to the workforce.
A University of Chicago professor and his colleague applied some simple macroeconomic modeling to that thought and found it’s probably more complicated than it seems.
When Congress passed the CARES Act, they approved an additional $600 in weekly unemployment funds. That extra unemployment supplement meant many workers were receiving more to stay home than they had earned at work.
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In their analysis, Professors Simon Mongey and Corina Boar said other factors, including the uncertain nature of the higher pay and more uncertain nature that a job will still be there once they decide to clock back in, mean the taxpayer subsidy to stay home would likely have to be nearly double what an unemployed worker made before they were laid off before they started passing up offers to get back to work.
“Quantitatively, once these factors are taken into account, we find that very few workers
would not have returned to work,” the study said. “Only workers with a low previous wage, an almost certain return-to-work offer, and very low wage losses after unemployment would turn down their old job and remain unemployed under the CARES Act.”
Mongey said the compensation, which was around 30 percent higher than many made working when the CARES Act was added in, would need to be much higher to keep most people from getting back to work.
“When we factor in the fact that the CARES Act is temporary, it takes people time to find a job when they lose their offer of going back to work, and standard estimates for how much individual wages fall when they go across jobs in a recession, we find that the worker would have to receive benefits which are almost double their previous wage,” Mongey said.
Other factors, Mongey added, include what type of work the unemployed worker had before. A skillset with higher demand, dental hygenist for instance, would potentially be less afraid to turn away an offer to get back to work since they would likely have dentists lining up to give them work when they wanted it.
Mongey said a low-skill worker would be more insecure about their job prospects and be more likely accept an offer.
The paper also notes that unemployment means the loss of commonly-offered perks like health insurance, something even more important to workers with families or a higher need for coverage.