It shouldn’t surprise anyone that when you pay people not to work—they won’t.
American small businesses grappled with this reality during the Coronavirus pandemic after Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Included in this bill’s many expensive provisions was a $600 weekly unemployment insurance (UI) boost. Intended as a stopgap during mandated lockdowns in early 2020, the CARES Act’s UI boost ended up paying the equivalent of more than $50,000 per year on average—making unemployment more lucrative than working and earning a living.
Worse, when states began lifting restrictions and businesses were able to open up again, the boost in unemployment benefits became the primary reason for workers to refuse to return to work. After all, they made more money sitting at home. To be clear, this is fraud. Top that with ineligible out-of-state claims and people registering under others’ names and the boost was a nightmare for this country.
Fortunately, the boost expired at the end of July, and we immediately saw a dramatic improvement in the national economy. Unfortunately, this seems to be lost on some in Congress who want to renew these payments. A revived weekly unemployment bonus is included in multiple relief proposals. Repeating this mistake would derail our economic comeback, kill hundreds of thousands of small businesses for good, and add insult to injury for the American worker.
This week, United States Department of Labor Secretary Eugene Scalia echoed these concerns during a virtual event put on by the American Enterprise Institute (AEI).
During the AEI event, Sec. Scalia made the incentive problem quite clear:
“Massachusetts and Washington state workers could receive a maximum benefit that, on an annualized basis, totaled more than $70,000 a year. In Oklahoma, median wage replacement for unemployed workers was estimated to be 165 percent. In contrast to all this, the federal plus-up in response to the Great Recession was $25-a-week and ended with unemployment still at 9.3 percent nationally.”
Even before adding the $600 weekly bonus, unemployment insurance was a fraud-filled system. After the bonus, a flag was raised to fraudsters everywhere: ‘get in now while the getting’s good.’ According to a Bank of America report, California alone is facing nearly $2 billion in fraud related to pandemic-related unemployment benefits. At AEI, Sec. Scalia went on to say that the CARES Act added roughly $380 billion in UI payments, with at least $38 billion of it being improper because of the CARES Act and its $600 bonus.
A UI boost is expensive. It’s wrought with fraud. And it’s not supported by the American people. According to polling from the Foundation for Government Accountability (FGA), the American people support worker independence over government dependency. In fact, 51 percent of all voters, including 57 percent of independents, supported the expiration of the $600 bonus.
Similarly, 51 percent of all voters do not want the UI bonus to make a comeback. In fact, only about 35 percent of American voters support bringing the bonus back, even if the bonus amount is reduced. Interestingly, there is more support for bringing back a $25 UI bonus à la 2009 Great Recession than there is for a $500 UI bonus or even a $300 UI bonus, which is the amount being proposed in the latest legislation.
The American people clearly smell something fishy with big UI bonuses, and they’re right. Fortunately, the American people have an advocate right now in Labor Secretary Scalia, who is right to oppose bringing back UI bonuses. The UI system’s history of fraud was kindling, COVID was the spark, and the CARES Act payments were gasoline to the flames.
If Congress wants the American people to have a better 2021, it’s time to hold firm against calls to renew the unemployment boost. Work, not dependency or bailouts, is going to keep us on the path to recovery in the new year.