In the CARES Act, Congress added an extra $600 boost to the unemployment program during the COVID-19 lockdowns that left tens of millions of Americans out of work. That boost expired in July, but Congress once again is debating whether to let it stay in the past. Congress must not extend this benefit and here are three big reasons why:
#1: It isn’t an incentive to go back to work
$600 might not seem like much, but when it combined with state unemployment programs, many across the country were experiencing a sudden windfall. It was also unprecedented—even during the Great Recession, the boost was only $25.
Thanks to this massive influx of stay-at-home pay, nearly seven out of 10 people who received the boost were getting more than they were earning at their original job. One in five were getting two times their old paycheck. The Congressional Budget Office also says that if the boost is extended, five of every six people in this country will get more than their salary to stay home indefinitely. The average unemployed worker received nearly $1,000 per week, which would amount up to $50,000 a year.
Great for bank accounts—terrible for business. 65 percent of small businesses are having a tough time getting their workers to return. The United States has already lost more than 140,000 small businesses to the COVID-19 lockdowns. Now the businesses that were able to weather that storm are forced to compete with welfare for their employees. With no financial incentive to return, how can businesses be expected to win that fight?
#2: It’s allowed fraud to run rampant
The $600 boost contributed to fraud. Traditionally, refusing to return to work so you can stay on unemployment in and of itself was fraud, but the fraudulent behavior doesn’t end there.
The U.S. Department of Labor estimates that $26 billion of improper unemployment payments is directly attributable to the CARES Act, and the attacks range from identity theft to international criminal activity.
With overwhelmed state systems and a huge influx of cash available, increased benefit durations past state maximums, permitting states to suspend critical job search requirements, and benefits for previously ineligible people, it was a perfect storm for fraud to run rampant.
Extending the boost will do nothing but continue making criminal activity more lucrative.
#3: It’s holding back the American recovery
Rampant fraud and workers who refuse to work don’t set America up for a successful recovery. Before COVID-19, American unemployment was at historic lows, wages were rising, and jobs were plentiful. We can get there again, but it’s going to take an act of courage from Congress. It’s imperative that Congress resist temptation to extend the unemployment boost. Small businesses, federal and state budgets, and the long-term success of our workforce depend on it.