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A Few Weeks of Supplemental Unemployment Assistance Is No Substitute for Congressional Action

September 1, 2020, by Jon Peacock

Wisconsin has applied for the supplemental federal unemployment benefit recently authorized by executive actions taken by President Trump. Although the $300 per week supplemental payments will briefly provide some financial relief for thousands of Wisconsin families once the new program goes into effect, it will fall far short of the larger and longer-term supplemental assistance that expired in late July.

Democrats in the House of Representatives approved a bill – the Heroes Act – that would extend the previous supplemental unemployment assistance. However, the President has opposed that bill, and Senator McConnell has blocked efforts to bring it to a vote in the Senate.

This blog post summarizes some of the data illustrating the need to renew the unemployment assistance that ended five weeks ago, and it examines the key differences between those unemployment benefits and the financial assistance for unemployed workers authorized unilaterally by the President (referred to as “lost wages payments”). In short, the new supplemental unemployment assistance that will probably go into effect in Wisconsin in October is much smaller than the prior benefit, will exclude some of the neediest people, and will only be in place for a month or so. More specifically:

Many low-paid workers are excluded – The new supplemental payments leave out workers who are receiving less than $100 per week in jobless benefits under the regular state formula. In other words, the laid-off workers most in need of assistance will not get any help at all from the new federal supplement. This change will disproportionately hurt people of color because they are more likely to have had low-wage or part-time employment that qualifies them for lower state benefit amounts.

Cutting the weekly amount of assistance in half – The most widely cited difference between the supplemental payments that ended in July and the ones authorized by the President is that the weekly amount has been cut in half – from $600 down to $300. 

The new benefits will last just a few weeks – Once a state’s application to administer the new assistance is approved, the state’s residents are only guaranteed three weeks of the supplemental payments.  After that, there could be one to three additional weeks of assistance, but that will depend on how much of the potential funding is not needed for disaster relief. (See the next point.) By comparison, the bill approved by the House and awaiting Senate action would provide more generous supplementary benefits though the end of the year.

The diversion of federal disaster assistance – In order to pay for the supplemental benefit without a Congressional appropriation of revenue, the President is diverting funding that was intended to finance federal disaster assistance. That is a very problematic strategy at a time when our nation is reeling from huge wildfires, the disastrous windstorm in Iowa, and a record-setting hurricane – and when more storms are likely in the coming weeks.

A longer and more expensive startup period – Restoring the previous benefit could be accomplished almost immediately in every state.  However, implementing the new version authorized by the President, which has different eligibility rules, requires extensive programming changes that are difficult to make to the antiquated computer software used for administering unemployment benefits in Wisconsin and many other states.  The Wisconsin Department of Workforce Development said this week that it doesn’t expect to be able to implement the revised federal assistance until sometime in October.  Our state will incur substantial costs to make the software changes, only to see the new program end very soon after it’s implemented. 

The other pieces of the President’s executive actions, such as the proposed payroll tax holiday, also provide far less relief than he claims and leave critical needs unaddressed. See this Budget Project Blog post for a summary of the other very substantial shortcomings of the President’s plans.

The need remains very high for continued federal assistance

Although the unemployment rate has fallen over the last couple of months, it is still very high.  As the following graph illustrates, in mid-August the number of Wisconsinites receiving unemployment benefits or waiting for their approval was six times the number in early March. With so many people still reliant on unemployment assistance, it is premature to sharply reduce the federal supplement.

The $600 per week boost to unemployment benefits provided a critical economic stimulus that helped reduce the job losses caused by the Cvid-19 recession.  The Economic Policy Institute estimates that replacing that assistance with the smaller and much shorter relief authorized by the President will result in such a large drop in spending that it will cost 2.6 million jobs over the next year.

The health and economic losses caused by the pandemic and the deep recession it spawned have fallen disproportionately on people of color. That is illustrated by the Economic Policy Institute’s recent analysis of national employment figures during the second quarter of 2020. They found that the unemployment rate was 17.4% among Blacks and 16.9% for Hispanics, compared to 10.8% for whites. For that reason and because the President’s actions exclude people who lost lower paid jobs, inaction in the Senate on the Heroes Act will worsen the racial divide in our nation. 

Turning to the economic effects of the current recession in Wisconsin, the following data from July Census Bureau surveys reinforce the conclusion that the President’s executive actions are an inadequate substitute for the much larger and more sustained assistance approved by the House:

  • An estimated 349,000 Wisconsin households (8%) reported difficulty getting enough food, and 128,000 households (12% of renters) were behind in their rent.
  • Almost half (47%) of Wisconsin children were in families that reported either being behind in their rent or not having enough food to eat.

To truly assist the millions of unemployed Americans facing evictions and struggling to feed their children, it’s time for the Trump Administration and Republican congressional leaders to go back to bipartisan negotiations and develop a relief package of the scale necessary to get our nation through this unprecedented health care and economic crisis.

Jon Peacock