Unemployment Compensation

Unemployment Compensation

Published on July 16, 2020 / Leer en español 

Rosanna close-up
Director - Washington, D.C. Office

As many as 17.8 million individuals – through no fault of their own – were laid off from work during the month of June, yet another month of elevated unemployment figures across the United States. However, great uncertainty lies ahead for the 50 million Americans that have relied on emergency unemployment compensation to meet basic needs after unexpectedly losing their job due to the COVID-19 pandemic, as the extra unemployment assistance is scheduled to end by July 31.

After stalling for nearly three months to issue necessary social distancing guidelines and promoting other disease mitigation and prevention practices, the federal government stepped in to provide short-term economic relief to those negatively impacted by the virus. Federal officials and Congressional leaders agreed to three major packages for economic relief, two of which directly addressed high unemployment levels: the Families First Coronavirus Response Act (FFCRA), and the Coronavirus Aid, Relief, and the Coronavirus Aid, Relief and Economic Security (CARES) Act.

When deliberating the amount of aid necessary, officials assessed the impact of the disease on different sectors of the economy and decided on the appropriate degree of government intervention.  Small businesses, for example, were extended access to over $625 billion in forgivable loans to mitigate revenue shortfalls and allow them to continue meeting payroll expenses; commercial airlines were offered over $25 billion.

Unemployment provisions in the FFCRA included up to $1 billion of aid for states to administer emergency unemployment insurance, as well as an expansion of medical and family leave benefits – benefits individuals are eligible to claim as part of payroll contributions.

Section 2102 of the CARES Act provides unemployment assistance to assist individuals not traditionally eligible under state or federal law (for example, self-employed and independent contractors). Specifically, it “requires the Department of Labor to provide pandemic unemployment assistance for up to 39 weeks to workers who (1) are not eligible for other federal or state unemployment insurance or pandemic emergency unemployment compensation; (2) meet certain conditions related to being unemployed, partially unemployed, or unable to work due to COVID-19; (3) are not able to telework; and (4) are not receiving other paid leave.”

Unemployment Compensation is a jointly administered federal-state program.  The federal government issues general guidance on benefit coverage, eligibility, but it is states, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, that make the final determination about the scope of the program. However, the CARES Act provides an additional federal pandemic unemployment compensation of $600 a week for unemployed individuals. This is the special compensation that expires on July 31, 2020.

The nearing expiration date means Congress must decide whether to reform or renew the program. Temporary wage replacement is necessary in order for households to continue meeting fixed payments, such as rent or mortgage and utility expenses.

In response, on May 12, House Democrats introduced the Health and Economic Recovery Omnibus Emergency Solutions Act, known as the HEROES Act, which temporarily extends the life of these programs. Many Republicans argue pandemic unemployment assistance provides more benefits and compensation than would otherwise be afforded in the formal workplace.   The Director for the National Economic Council (NEC), Larry Kudlow, recently suggested the White House would prefer to let the program expire.  “I mean, we’re paying people not to work. It’s better than their salaries would get. That might have worked for the first couple of months. It’ll end in late July.”

In early June, Secretary of Labor Eugene Scalia testified before the Senate Finance Committee on the implementation of COVID-related federal unemployment insurance provisions of the FFCRA and the CARES Act.  In his testimony, Secretary Scalia also indicated “the CARES benefits were intended to be temporary, and will expire at the end of next month, by which point we expect the economy to be deep into the process of re-opening, with shut-down orders ended and—Friday’s jobs report confirms—millions of Americans freed to return to work.” However, as the recent spikes in coronavirus cases in Florida and Texas illustrate, rushing to reopen economies could result in increased infections and inevitably, prolong the health crisis. Reassessing the expiration and scope of unemployment benefits is, therefore, particularly important at this time.