Unemployment compensation: Oregon pays well, but too many states lag far behind

Congress patted itself on the back Sunday when it reached agreement on a pandemic aid plan including supplemental federal unemployment benefits of $300 per week, half the $600 a week delivered by the stimulus law enacted in March.

One of the conservative criticisms of the $600 payment was that it disincentivized people from seeking to return to work because itresulted in many people being eligible for more income while unemployed than they had made when unemployed. Some economists disagreed, asserting that the additional benefits did not deter job seekers. 

An analysis by three economists at the University of Chicago used government data from 2019 to estimate that 68 percent of unemployed workers who could receive unemployment benefits were eligible for payments that were greater than their lost earnings and that a substantial minority of those workers, particularly in low-wage professions like food service and janitorial work, ended receiving more than 150 percent of their previous weekly salary.

Surprisingly, the new $300 weekly supplement will also result in many recipients taking in more in unemployment benefits than they earned working. Estimates of the percentage, however, differ.

The Labor Department has said a $300 supplemental unemployment payment would give about 50% of workers at least the same amount of money through benefits that they earned while working.  The American Action Forum, a center-right policy institute, has estimated that 45% of recipients would receive at least full wage replacement with a $300 enhancement. University of Chicago economist Peter Ganong figured a $300 supplement would put 47% of workers above their prior earnings.

I find this appalling, but not for the reason you may think. I’m not all that concerned in these particularly difficult times about some workers collecting more in unemployment benefits than they earned when working. What raises my hackles is that the pandemic has shown how pitifully low so many American’s wages are and that many states pay abysmally low unemployment benefits in normal times.

That puts a significant number of unemployed Americans in peril.

A team of researchers at the Poverty Lab and the Rustandy Center for Social Sector Innovation at the University of Chicago in partnership with the University of Chicago, implemented a seven-wave longitudinal survey between April and October 2020 that illustrates the issue. Their research showed that Americans are experiencing financial hardship due to the crisis. Among low-income households, 17 percent have missed a rent or mortgage payment and over a quarter have missed a credit card or a loan payment since the start of the pandemic. Across income groups, about 15 percent of the families in our sample have withdrawn from their retirement savings, potentially undermining their future financial stability. 

A current analysis shows that states with alarmingly low maximum weekly unemployment benefits include Alabama ($275), Arizona ($240), Florida ($275), Louisiana ($247) and the lowest, Mississippi, at ($235). Coincidentally, some of these same states have not taken steps to protect tenants with a COVID-19-related financial hardship from being evicted. In comparison, Oregon’s maximum is $648, Massachusetts’ is $823 for an individual and $1234 for an individual with dependents, and Minnesota’s is $740.

Adding insult to injury, though most states pay unemployment compensation for a maximum of 26 weeks, subject to prevailing state unemployment rates, some are more miserly. The maximum number of weeks is 20 in Arkansas, South Carolina, Michigan and Idaho, 14 in Georgia, 13 in Missouri and 12 in Florida and North Carolina. In all, 29 states pay a maximum weekly benefit of $500 a week or less.

The 2020 Federal Poverty Level (FPL), a measure of income issued every year by the Department of Health and Human Services (HHS), is $26,200 for a family of 4, or $503.85 a week. In other words, maximum unemployment compensation in 29 states is less than the federal poverty level of income for a family of 4. In Alabama, Arizona, Florida, Louisiana and Mississippi, maximum unemployment compensation is about half of the 2020 federal poverty level for a family of four.

David Lloyd George, a former Prime Minister of the United Kingdom, called unemployment torture “…with its injustice for the man who seeks and thirsts for employment, who begs for labour and cannot get it, and who is punished for failure he is not responsible for by the starvation of his children.”  

With that in mind, surely this nation, this shining city on a hill, can do better.

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