As the pandemic and the resultant economic shutdown presses on, the number of unemployed workers in the United States remains higher than ever. When the CARES Act that created the Federal Pandemic Unemployment Compensation program (FPUC) was passed in late March with a stated expiration date of July 31, it was impossible to imagine that the negative economic effects would persist well beyond the spring and summer.
Yet we now find ourselves in August with over 160,000 nationwide deaths and with a patchwork of reopening phases in response. These realities mean that unemployed workers are likely to remain unemployed for some time, due either to lack of opportunities or exposure to the virus. Weekly unemployment claims in the Capital Region have stagnated, with more than 55,000 people seeking benefits. Without the $600 weekly federal supplement, jobless Louisianans are eligible for up to $247 per week, and the trust fund from which these benefits are drawn is dwindling rapidly. Alarmingly, that $600 weekly benefit has come to approximately $33 million in weekly income to Capital Region residents. The loss of that benefit, which took place on July 31, translates to a loss of that money being available for spending at area small businesses. For the sake of unemployed individuals and the survival of area small businesses, some form of benefit is critical.
Congress has been negotiating proposals to extend a federal unemployment assistance supplement, with House and Senate versions appearing as follows:
- House Democrats have passed legislation renewing the flat $600 per week Federal supplement.
- Senate Republicans introduced a plan to target 70% wage replacement (combined state and Federal payments), with a cap on the weekly Federal supplement of $500. If state unemployment systems are unable to compute the percentage of wages for the federal supplement, the weekly federal supplement would be $200.
A continuation of the $600 weekly flat supplement as passed in the House’s HEROES Act maintains what BRAC investors have reported is a disincentive to seek work for those who stand to make more money on unemployment than they did at their former jobs. Here in Louisiana, the annualized maximum benefit of state and federal COVID unemployment benefits come to more than $44,000 – very near the state’s median household income. Potentially improving this disincentive is a reinstatement of the requirement that claimants prove they’re actively seeking employment in order to receive unemployment benefits, a rule Governor Edwards put back into place effective as of August 9.
There is an advantage to a flat weekly supplement as state unemployment offices are already set up to administer a flat supplement. Plans that tie supplement amount to a percentage of wages could take time for states to implement, with the National Association of State Workforce Agencies estimating states could take anywhere from one to four months to put the necessary systems into place.
The U.S. Chamber has recommended a plan similarly structured to that of the Senate proposal, with target replacement between 80% and 90% of an individual’s working wages (85% is used for the analysis below) and a supplement cap of $400. If a state cannot conduct the individual calculations, each recipient will receive a flat $200 supplement.
As Congress’ negotiations have dragged on, President Trump released a memorandum on August 8 that calls for extending some enhanced unemployment benefits, leveraging up to $44 billion of federal funds for the benefits to come from the Department of Homeland Security’s Disaster Relief Fund (DRF). Under this new program, unemployed claimants will receive a supplement of $400 per week: $300 from a federal contribution and $100 provided by states. The supplement will be paid to eligible claimants starting the week of unemployment ending August 1, 2020. The program would remain in place until the balance of the DRF reaches $25 billion (it currently has more than $70 billion) or December 6, 2020, whichever occurs first. If Congress passes legislation extending federal unemployment assistance, the executive program will terminate.
Trump’s plan, which falls in between those of Senate Republicans and House Democrats, has garnered mixed reactions from governors across the country who have concerns over the financial impact it will have on states. The White House said states could use funding from the March coronavirus relief package, the CARES Act, to fund their portion of the benefits, although it would clearly need to be reallocated from other uses.
The U.S. Chamber developed a tool to analyze the unemployment insurance outlook for every state based on each proposed Congressional plan. In Louisiana, the average person was taking home 110% of their wages before the FPUC expired. What do each of the proposed plans mean for the 55,000 unemployed workers in the Baton Rouge Area?
- State-Only Benefits
- $218.54 average weekly benefit
- 29% average wage replacement
- House Democrat Proposal
- $818.54 average weekly benefit
- 110% average wage replacement
- Senate Republican Proposal
- $520.28 average weekly benefit
- 70% average wage replacement
- The U.S. Chamber Proposal
- $619 average weekly benefit
- 83% replacement of wages
While it remains to be seen how the President’s stopgap measure will be carried out, the extension of benefits offers some hope to unemployed Louisianians and to small businesses who are relying on that weekly income and the spending it allows.
Visit the Baton Rouge Area Chamber’s BR Works site to find open job opportunities in the Capital Region and brac.org/recovery for more COVID-19 resources and analysis.