UI Boost Makes Unemployment Twice as Lucrative as Work for Low-Wage Workers, New Study Finds

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Naples, FL — Unemployed low-wage workers are now receiving nearly twice as much money on unemployment than they earned while working, a new study from the Foundation for Government Accountability (FGA) finds. A low-wage worker previously earning $445 per week—roughly $23,000 per year—is now collecting $832 per week in unemployment benefits—the equivalent of more than $43,000 annually.

The study shows that small businesses would need to offer at least $21 per hour to compete with unemployment benefits and entice former employees to return to work.

Prior to the COVID-19 outbreak, the average low-wage worker on unemployment collected the equivalent of roughly 52 percent of his or her previous earnings. The unemployment insurance (UI) boost contained in the CARES Act has fundamentally changed this. Now, the average wage replacement rate for a low-wage worker is an astonishing 187 percent, nearly four times greater than pre-COVID-19 wage replacement rates.

“Businesses and sectors with low-wage workers have been among the most severely impacted by COVID-19 and government-mandated shutdowns, and the UI boost threatens to exacerbate this damage by actively encouraging workers to remain unemployed,” said Hayden Dublois, research analyst at FGA. “Put simply, across the nation—and as a direct result of bad government policy—unemployment has become far more attractive than work. Federal policymakers must take steps to let the UI boost expire as scheduled in order to fast track the economic recovery.” 

Read the full report here.

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The Foundation for Government Accountability is a non-profit, multi-state think tank that specializes in health care, welfare, and work reform. To learn more, visit TheFGA.org