As resurgent COVID-19 infections prompt states to slow down or reverse restaurant openings, putting scores of workers at risk for layoffs, the enhanced unemployment payouts that millions rely on have effectively expired. That’s bad, as the development will guarantee an interruption in vital aid for some of the most vulnerable Americans. But Republicans, alas, are here to make things worse: GOP senators issued a plan on Monday to replace the weekly $600 Federal Pandemic Unemployment Compensation checks with a benefit that’s smaller by about two-thirds.
The overhaul is part of a cruel effort to create what President Donald Trump calls “a very great incentive to work,” even as the virus increasingly kills 1,000 people every day. If a larger goal of public policy is to prop up the economy through higher consumer spending while getting fewer people sick, this flawed legislation should produce precisely the opposite result. It’s a terrible plan.
Jobless people in New York and elsewhere have now received their final $600 checks, a benefit that has helped many collect their full salaries (or more) when combined with state unemployment. If Sen. Mitch McConnell and the White House get their way, they’ll slash federal assistance to $200 per worker, before switching to a formula pegged to a percentage of one’s salary. That move will push many deeper into debt as they see their scant monthly earnings fall by $1,700 or more.
The legislative package, dubbed the HEALS Act, also paves the way for a second round of stimulus payments, as well as another round of paycheck loans for small businesses.
Republicans, to be clear, are moving to cut federal unemployment benefits because they believe the $600 checks disincentivize folks from looking for work — an illogical argument because there aren’t enough jobs in the first place. The slashing of aid would come as over 60 percent of New York City hospitality workers remain out of work, where the local unemployment rate exceeds 20 percent. The cuts would also come as 31 million Americans continue to claim unemployment, and as COVID-19 continues to kill low-wage workers who don’t have the luxury of telecommuting. One can’t serve rich folks wagyu burgers with puffed beef tendon from the safety of a home office.
The Republican proposal is an opening bid as part of negotiations with House Democrats, who already voted for an extension of the $600 checks, and who’ll need to agree to any piece of legislation that reaches the president’s desk. That means whatever ends up passing will look different from this new plan. Still, the legislation is worth examining because it highlights how the party that controls the White House and the Senate believes that some of the most vulnerable Americans should make do with less aid and go find a job — rather than save a few extra dollars and stay at home while steering clear of a virus that has sickened millions.
What follows is a breakdown of the McConnell-White House plan and how much workers will lose if the GOP has its way.
What are the details of the plan?
The Republican unemployment proposal involves reducing weekly payments from $600 to $200 until October, per the Washington Post. After that, the federal government would help state unemployment systems pay up to 70 percent of a worker’s salary, kicking in up to $500 per week to meet that threshold, according to the Tax Foundation. Many state unemployment agencies currently pay about half of one’s salary.
Greater challenges remain if this plan is implemented, however. States with antiquated unemployment systems could face difficulties administering the new benefit, something that White House chief of staff Mark Meadows has publicly acknowledged. California, after all, had a backlog of 2 million unemployment claims early in July, even with the simpler $600 system. To that effect, states can apply for a waiver to continue the initial $200 payments for two more months before switching to the 70 percent formula, the Post reports.
How much will restaurant workers lose?
Before the pandemic, New York City waiters earned on average $3,537 per month while on the job. When restaurants shuttered and the enhanced pandemic program debuted to supplement state unemployment, those same workers likely earned just over $4,000. But if Republicans institute their 70 percent plan, that number would fall to $2,285, constituting a loss of $10,000 through the end of January, when the Democratic aid extension was supposed to run out.
New York dishwashers, by contrast, likely earned $3,616 per month on enhanced unemployment — much more than while at work. The HEALS Act plan would drop that monthly number to $1,704, or roughly $10.50 per hour, well under the minimum hourly wage of $15.
Republicans, again, see the $600 checks acting as a disincentive to work. But one could argue that financially encouraging people to stay at home to prevent virus transmission is a sound policy goal. Just the same, one might suggest that an era plagued by historically high unemployment might not be a good time to conduct an economic experiment that involves reducing aid to taxpayers and further dampening, as a JPMorgan study suggests, the consumer spending that drives so much of the country’s fragile economy.
Any enhanced unemployment aid, it should be added, isn’t just stay-at-home pay for workers. It’s essentially their hazard pay, their extra compensation for years of being underpaid and in a job without severance. It’s their assurance if this all happens again, maybe they’ll have a little extra in the bank as a tiny safety net.
Could higher-paid hospitality workers see deeper losses due to the benefit cap?
Yep. No one was getting rich off pandemic assistance, and a whole lot of folks were losing money. Higher-earning workers like wait captains at fine dining establishments, executive chefs at high-profile venues, and head bartenders — jobs that can pay $125,000 or more — were already losing thousands of dollars while out of work. New York state unemployment assistance alone is supposed to pay half of one’s regular wages, but that benefit caps out at $504 per week, which is understandable: Otherwise, the state would go bankrupt shelling out top dollar to replace a banker’s or lawyer’s lost income.
So over a four-week period, a fine dining waiter wouldn’t have earned more than $4,400 with those now-expired pandemic checks added on, likely well under half their previous monthly pay. The Republican plan would cut that sum by even more, as the federal government wouldn’t contribute more than $500 to help meet the 70 percent salary goal. And while the lowest-paid workers will always be the most vulnerable in every sense, higher earners aren’t likely to find their mortgage, car, or college tuition payments all magically reduced by half as their income drops by as much. Defaults on those payments will have profound repercussions for the lives and families of workers who fought tooth and nail to climb their respective career ladders and earn a stable living. Those defaults will also further destabilize the larger economy.
NYC Workers Would Lose Big Under Republican Unemployment Plan
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Will there be an interruption in benefits as Congress negotiates?
Almost certainly. The enhanced unemployment benefits ran out this week, and Congress isn’t expected to come to an agreement by the time the next checks would clear. McConnell has said he expects to negotiate the stimulus in the next few weeks, which means that tens of millions of Americans, per Politico, will go without federal benefits in the meantime. Instead, they’ll have to make do with more austere state unemployment aid, which can fall to half the hourly minimum wage for fast food workers and others.
Aid to business still comes easier than aid to individuals, right?
Indeed. The true irony is that as Republican senators hold up aid to American workers, Congress authorized an extension of the Paycheck Protection Program for businesses when it expired last month. Congress also loosened the terms of the paycheck loans so they could be used through the end of December, and the current Republican bill even lets businesses apply for yet another forgivable paycheck loan if they need it.
What that means is that the ruling party has shown it’s willing to bend over backwards to help businesses, while using the people who keep those businesses running as bargaining chip. The ruling party values your labor more than your life, and is deeply afraid of anything that makes that dystopian calculus more expensive.
The result is something we can call McConnell-nomics: Even when lives are at risk, even when there aren’t enough jobs, the government will reduce benefits to get low-wage workers off the social safety net, forcing them to work for a living wage or die trying.